How to Analyze Real Estate Deals

Valuable Information On How To Analyze Real Estate Deals And Understand Their Attractiveness

An investment property is a huge step. It will affect the life of a small investor owning just 1 property object in the most dramatic way – for decades to come. This means you have to be very wise when calculating profitability and other numbers associated with your investment. How to value real estate and what exactly you should calculate? We’ll review everything in this article.

How to analyze real estate deals

Every investment deal should bring you profit. So you should rigorously estimate every object based on several basic criteria (indices) that we’re considering below. Throughout this text, we are going to bear in mind a multi-unit property, which is estimated very differently from the one made for 1 family.

Basic data a.k.a. real estate metrics you have to collect are as follows:

  • Property detail: number of units, footage, condition, location
  • Purchase cost
  • Financing details – which part of the money to buy a property will be financed from your own costs and which one you’ll have to get from the bank
  • Income from the object
  • Expenses for the object.

For the sake of avoiding specifics of any market, let’s just consider some 8-apartment place with a code name “Watermelon” (simply because we love this berry).

The basic data about this real estate object is as such (to make the entire set of calculations for the real estate deal analysis):

Price, $ 500,000
Gross income, $ 62,400
Other income, $ 4,500
Vacancy rate (annual average) 12,5%
Taxes, $ 5,000
Insurance, $ 1,000
Maintenance, $ 4,000
Advertising, $ 1,000
Utilities, $ 5,000
Net operating income, $ 43,100
Down payment, $ 90,000
Improvements, $ 15,000
Closing costs, $ 9,000

A gross income is the sum of all monthly rent payments from all apartments of Watermelon plus all additional incomes that you receive from laundry, parking, kitchen, bar, and other services. In Watermelon, we have 8 apts. each paying on average $650 monthly ($650*8*12) + $4,500 other = $62,400 a year.

What does ARV mean in real estate

ARV is the first of the important metrics. ARV is the cost of the property after renovation/rehabbing (to make it feasible to live and enjoy). For Watermelon, ARV is the price + improvements + closing costs = $524,000. ARV defines the entire cost of the object that you’ll bear upon the purchase and turning it into a full-value cost.

Net operating income and expenses

A net operating income a.k.a. NOI is what you have left on a yearly basis after you deduct the total yearly expenses (TYE) from the vacancy-rate adjusted gross income (VRAGI).


In Watermelon,

VRAGI = $62,400*vacancy rate (12.5% annual on average) = $59,100

TYE = taxes + insurance + maintenance + advertising + utilities (let’s consider that “utilities” include everything a landlord pays in general for the residential object during its running like utility bills for a manager office (if it exists) and the rest of the place in general, which would include water, gas, electricity, heating, fixing, repairs, trash, snow removal, sewer, pest control, cleaning, cable, Internet & TV, car expenses, office supply, telephony, technology, software, lawyers, pool maintenance and heating, lawn care, and plumbers) = $16.000. We normally consider that unit-specific utilities are paid by tenants.

Watermelon’s NOI = $43,100.

That means you earn a net operating income per year of $43,100.

But if you have to calculate the real estate discount rate as well, you should be based on NOI and deduct the yearly depreciation from this number. That will depend on your particular type of premises and yearly norm of deduction, which could span from 1 through 5, 10, 15, 27.5, to 39 years. That would also depend on your type of repairs and improvements that you do in your real estate over time. For instance, if you consider the complete depreciation of the Total Cost (after repair value) of $524,000 through 27.5 years, the yearly number would be $19,054.55. And then, the discount-adjusted yearly NOI for Watermelon will be $24,045.45.

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Cash Flow

Another important thing is the cash flow. Cash flow is the income minus expenses minus taxes & vacancy rate. We also include right now your financing cost since you have it.

So, to make the full stop in our particular Watermelon issue in Cash Flow, since we have bank installments, we have to find out, what we really earn. We, mean, REALLY. Let’s look at the numbers for Watermelon:

Total cost (after repair value), $ 524,000
Cash outlay, $ 114,000
Financed part, $ 410,000
Interest rate, % 6%
Mortgage, years 30
Mortgage, monthly payment, $ 2,458.16
Mortgage, yearly payment, $ 29,497.92

Here, you see that we have a financed part to buy the property of $410,000. With a calculated interest rate of 6% and 30 years of mortgage, our monthly installment is $2,458.16, which makes it $29,497.92 yearly.

So, the cash flow for Watermelon is $43,100 minus the mortgage’s yearly payment = $13,602.08. This is what you have left on your hands for real.


ROI is the return on investment. Its formula broadly varies depending on the source conditions in each and every market. Most generally, it tells about how many years and months your investments fully recoup. For Watermelon, it is expedient to consider that you will have spent the ‘Cash outlay’ to purchase the object and you will be recouping it with the real cash flow.

That is, Watermelon’s ROI = $114,000/$13,602.08 ≈ 8 years 5 months.

We do not consider bank investments since we’re only interested when we ‘get our own money back to us.

COCR (cash-on-cash return)

Last but not least – cash on cash return is, basically speaking, the profitability of your cash investments on a yearly basis. This indicator does not include your bank installments since it is bank-neutral (applicable for both people investing in real estate with and without the bank’s input).

Watermelon’s COCR = NOI (not discount-adjusted) / Cash outlay *100% = 43,600/114,000*100% = 37.81%. Not bad! Sure, you could calculate the discount-adjusted yearly NOI for Watermelon, why not! Then the result will be 21.09%, which is also not bad at all.

As we can see, our hypothetical Watermelon investment is significantly more lucrative than a certificate of deposit, high-interest savings account, or even the stock market’s average ROI.


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More about DGY

DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.

Investment advice and recommendations

DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.

Property management

In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.

Property Renovation

DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.


Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.

Real estate investment opportunities in Ukraine

When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.

Properties for investments in Ukraine

Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $85k only.

How to invest in Ukrainian Real Estate

In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.