chapter 1:Acquiring Essential Data

Before immersing yourself in the foundational calculations integral to real estate investments, addressing a crucial aspect is paramount: the need for raw data to facilitate accurate calculations and projections. Valuable information doesn’t materialize effortlessly; it necessitates your active pursuit.

These guidelines offer general direction, acknowledging that data accessibility can vary significantly across localities and transactions. However, learning from JSE market debacles such as Steinhoff International and Tongaat Huulet underscores the critical importance for investors to grasp the true nature of their investments. It’s imperative to seek factual information, as the consequences of overlooking this can be unfavorable.

We mainly use two services LightStone or WinDeed

Property-Specific Data

When considering the acquisition of an income property, comprehensive knowledge of its income and expenses becomes crucial. Emphasizing that an investment is essentially the purchase of an income stream rather than just a physical property underscores the significance of focusing on the bottom line.

Information regarding the income property generally comes from the seller or the seller’s agent. Prior to delving into detailed financial analyses in the subsequent chapter, the initial concern is verifying the accuracy of this data. Several approaches can aid in this verification process:

  1. Review Leases: Examining lease terms helps gauge rental rates and their alignment with the seller’s claims. Lease durations and renewal options significantly impact current figures and future performance forecasts.
  2. Property Tax Evaluation: Scrutinizing the property tax bill confirms expense accuracy and unveils potential abatements or phased assessments that might affect future costs.
  3. Utility Bills Verification: Cross-checking utility bills against the seller’s assertions helps gauge data reliability and prompts explanations for any disparities.
  4. Seller’s Tax Return Sections: Extracting pertinent property-related income and expense details from the seller’s tax returns can be a revealing source of information.
  5. Incorporate Representations in the Purchase Offer: Legal consultation can aid in including seller warranties regarding lease specifics and rent income in the purchase offer, ensuring accountability post-transaction.

Market-Related Data

Researching comparable sales, understanding lease rates, operating expenses, and local capitalization rates form an integral part of informed decision-making:

  1. Comparable Sales: Exploring similar property sales offers insights, though rare, into market trends, often obtained from public records or specialized internet sources.
  2. Lease Rates and Operating Expense Data: Accessing information from brokers and property managers facilitates understanding tenant preferences and actual operating costs.
  3. Local Capitalization Rates: Knowledge of typical rates for specific property types and areas is invaluable for financial forecasting. Brokers and specialized sources like offer such data.

This where the lightstone app comes in, we can see the property reports and various other reports to gather data around our market

we will do a thourough video on how to use the lightstone app later in the video series.

Armed with comprehensive data, one can proceed to conduct an informed property analysis using real numbers.

prevoius chapter : introduction