There’s an old saying in real estate: you make your money when you buy, not when you sell.
It all boils down to spotting great deals that you can buy at a value. But, how do you know when a deal is truly worth pursuing?
In this article, you’ll learn proven strategies that foreign real estate investors use to uncover high-potential real estate deals and analyze them with clarity. With these tools and insights at your fingertips, you’ll be ready to move decisively when opportunity strikes. Keep reading to build the confidence to spot great deals and start making offers!
When it comes to finding real estate deals, there are two primary paths: on-market and off-market.
On-market properties are the ones you’ll find on Zillow, Redfin, or through a real estate agent—they’re out in the open for everyone to see. Off-market deals, on the other hand, are more like hidden gems. They’re not listed publicly, so they take time and resources to discover. In general, on-market deals are easier to find (they’re everywhere) but often come with higher price tags and more competition. Off-market properties require time, money, and effort to find, however there tends to be more flexibility in negotiating price.
Choosing to find leads on-market, off-market, or a mix of both will ultimately depend on your bandwidth and investing style. So what’s a better option? Both give investors like you plenty of opportunities to spot deals, it comes down to your personal preference. Let’s look at both options in more
The first step in your analysis is to have a strong understanding of the market. Knowing what properties sell and rent for will help you spot opportunities quickly and also filter out properties that are too expensive before digging in deeper. Here are three statistics that you should know about your market:
Over time and with consistent practice, you’ll start to recognize these numbers instinctively. You’ll be able to glance at a listing and know whether it’s worth pursuing or passing on, giving you a huge edge in competitive markets.
What’s the difference between a good deal and a bad deal?
Ask a handful of investors and you’ll get a handful of different answers. Depending on your strategy and criteria, a “good deal” could mean several different things. Naturally, the metrics and calculations you use will vary based on how you define success. These are some of the most common calculations to consider and the type of investor that they typically apply to:
Put simply, ROI measures how much money you’ll make compared to how much you’ve spent. To calculate ROI, start by subtracting your total investment cost from your total gain. Then, divide by the investment cost. In rental real estate, your gain typically comes from net rental income (after expenses) or profit from a sale.
This calculation gives you a percentage that reflects the overall efficiency of your investment. For example, if you invest $100,000 into a property and earn $8,000 in annual net income from cash flow, your ROI would be 8%.
While a strong ROI can indicate a solid deal, it doesn’t tell the full story. It leaves out details like how the purchase was financed, how quickly returns are realized, and what level of risk is involved. That’s why it’s smart to use ROI alongside other metrics like DSCR or cash-on-cash return when evaluating an investment.
Cash-on-cash return is a quick and practical metric that real estate investors use to understand how hard their invested cash is working. Investors using leverage (financing a deal) often use it to measure the return on their out-of-pocket investment, not the property's full value.
Before calculating your cash-on-cash return, there’s a few other answers you’ll need to have ready:
Now, divide the property's annual cash flow by your total cash investment. This formula gives you a percentage that represents your yearly return on the money you invested. For example, if you put $100,000 into a property and it earns you $10,000 in cash flow per year, your cash-on-cash return is 10%.
What’s considered a good return ultimately depends on your goals—ask yourself if this return is the best use of your money compared to other investment options.
DSCR or debt-service-coverage-ratio is a popular tool for real estate investors focused on cash flow. It’s a simple calculation that helps answer the question: “will this rental property make money every month after the mortgage is paid?”
Lenders use this metric to assess a property's performance, so you should, too! Just divide the property's operating income (typically rental income) by the mortgage payment (debt service).
If the result is greater than 1, the property is expected to generate positive cash flow. The higher the number, the stronger the projected performance. Assuming the DSCR calculation shows positive cash flow, it’s worth doing a deeper analysis.
For properties that don’t meet the DSCR criteria, it’s important to note that there are ways to increase the score. One example would be exploring ways to increase rent and thus your operating income. Another would be reducing your total debt service, which can often be achieved by making a larger down payment. However, when you’re trying to do a quick calculation to see if a deal is worth digging into, it may not be the best use of your time if other cash flowing options are available.
Numbers aren’t the only factor to consider when analyzing a deal. A property can look great on a spreadsheet, but not live up to your standards in reality. To successfully analyze a deal, start with solid market data and layer in qualitative insights. Talk to your real estate agent about the neighborhood, and even use tools like Google Maps to get a feel for the area.
Keep an eye out for red flags that could hurt the property's value such as being on a busy road, in a neglected part of town, or near undesirable locations. On the flip side, a strong area might offer easy access to public transportation, grocery stores, parks, and other key amenities that make it more attractive to renters or buyers later down the line when you’re ready to sell.
All of the analytical people love crunching the numbers and estimating expenses. These are some important factors to keep in mind when analyzing a property to get a more accurate idea of cash flow:
Worst-case scenarios are something that no one wants to talk about, but you need to take into consideration when analyzing deals. Think of this as the final layer of due diligence where you prepare for any issues that may come up. For example:
If any of these things happened, would you be prepared? The bottom line is to keep enough money in savings to cover unexpected situations. A good rule of thumb is to maintain at least six months of reserves in a U.S. bank account for your peace of mind. That way, you don’t need to scramble at the last minute and deal with fluctuating currency exchange rates as the time comes to pay your mortgage.
Once your numbers make sense and you've done your due diligence, you're ready to take the next step: making an offer. Use comparable property data and the factors discussed to inform your initial offer.
More aggressive investors take a broad approach, submitting multiple offers at prices that align with their investment criteria, knowing that only a few may be accepted. Others prefer a more conservative strategy, making offers one at a time when the right deal comes along. This all comes down to your personal preference. Use your research to guide your offer strategy and start taking action!
Have a property in mind? Get a mortgage quote today.
Analyzing deals is crucial to making offers and landing your next investment property. By following the strategies and tips in this guide, you’re setting yourself up for consistent success—not just with one deal, but with every deal that follows.
The path to a strong portfolio is simple: rinse and repeat. Take what works, refine what doesn’t, and stay active in the market. With each property, you’re not just adding an asset—you’re building a repeatable system that can scale your investing to the next level.
Fill out a quick form and we'll get back to you shortly.
