Let’s be real—no one has enough time in the day to do a deep dive analysis on every potential deal. Here at RidgeLine, we focus on five factors to help clients filter deals relatively quickly without losing opportunities. Below, we will discuss the five factors we consider at the beginning of each analysis: asset size, price per door, location, expenses, and rental upside.
Asset Size/type
Pick what area and asset type/size you are looking for. This helps immediately sift through deals that don’t fit this initial criteria. It’s important to try your best to stick to it so you don’t get inundated with deals that don’t fit your vision or ultimate goal. If something is on the edge of those limits, look at it. We found that with this method, clients are more focused, wasting less time and focusing more on actual opportunities.
Price Per Door
This factor becomes more important as you familiarize yourself with different areas. It’ll help you quickly realize if something is within the average pricing and hopefully below. Though you can use tools like Costar to get that information, it’s more effective when you have first-hand knowledge or have created the comps.
Location
This is where familiarity with the market really comes into play. The location can have an enormous impact on the value and the type of tenant demographic. In all cities, pockets vary greatly. Even from one side of the street to another, things can be very different. That’s why here at Ridgeline, we are focused just on Central Oregon, which we intimately know.
Expenses
We are always looking at where we can conservatively reduce expenses, often using Ridgeline to streamline your management. We know central Oregon, generally what expenses should be per door. Therefore, if expenses are higher than that, maybe there is some opportunity to reduce expenses. However, at times, there can be a good reason for higher expenses, for example, exceptionally high insurance costs. Expense reduction is our preferred method of upside.
Rental Upside
Again, as you become more familiar with the area, you can quickly determine what kind of rent upside there may be. Otherwise, you need to do a quick rent survey or get our opinion. We have fine-tuned the rent survey process so that we can complete it quickly if needed. We have a combination of rental upside and expense reduction.
Of course, there are many additional factors you should take into account once the property passes your filters and moves along in the process. The 5 factors outlined here are not an exact science but more of a general outline to get started. There will always be those deals you spend time analyzing that ultimately turn out to be worth it. You will do this knowingly and rather spend a little time than miss out on a solid opportunity.