There are many methods and tools to help analyze a particular property to determine if it is a good/bad property to pursue. A good spreadsheet (CRS 204 or the CCIM 101 by Todd Thorpe) is critical. I use the CRS 204 spreadsheet to do a quick analysis (it assumes you only pay interest on the mortgage loan) and if it gives me a positive return, I turn to the CCIM spreadsheet for a detailed analysis. The CCIM spreadsheet will give you a very detailed analysis including internal rate of return (how your invested money is performing), depreciation, tax liability and other advanced information for the “sophisticated” investor.
Using both tools helps to convince yourself and your team (banker/lender, insurance agent, investors, syndication group, etc.) that the investment is worth the risk.
For more information on these tools, contact your CRS Agent or CCIM Realtor. I am a CRS and a CCIM Candidate (production requirement pending) and can help you with your real estate needs in Colorado a well as other locations.