9. Deal Analysis Framework

A deal analysis framework is not about finding reasons to proceed.
It is about systematically attempting to disprove the deal before committing capital.

Strong investors say “no” far more often than “yes”.

9.1 Step-by-step deal analysis checklist

A structured checklist helps ensure consistency and reduces bias.

Step 1: Basic viability

  • Purchase price

  • Expected rent (based on achieved local rents, not listings)

  • Mortgage assumptions (rate, LTV, term)

  • Gross yield (screening metric only)

Purpose: eliminate deals that clearly do not work at a headline level.

Step 2: Full cashflow calculation

  • Mortgage cost (stress-tested rate)

  • Letting/management costs

  • Maintenance allowance

  • Insurance

  • Compliance costs

  • Void allowance

Purpose: identify net cashflow, not theoretical profit.

Step 3: Regulatory and structural checks

  • Licensing requirements

  • Planning constraints

  • Lease terms (if applicable)

  • Use restrictions

Purpose: ensure the deal is legally operable as intended.

Step 4: Area and demand validation

  • Tenant demand depth

  • Supply levels

  • Rent ceiling verification

  • Comparable property performance

Purpose: confirm demand supports assumptions.

Step 5: Exit considerations

  • Likely resale market

  • Buyer pool depth

  • Mortgageability on exit

Purpose: avoid assets that are difficult to sell later.

9.2 Pass / fail criteria

Clear pass/fail rules prevent rationalisation.

Common fail triggers include:

  • Negative cashflow under realistic assumptions

  • Rent assumptions above local ceilings

  • Regulatory risk that cannot be costed

  • Dependence on refinancing to survive

  • Yield reliant on perfect occupancy

A deal that only works under ideal conditions is fragile.

9.3 Sensitivity analysis (what breaks the deal)

Sensitivity analysis asks:

“What changes would turn this into a bad deal?”

Key variables to test:

  • Interest rate increases

  • Longer void periods

  • Lower achievable rent

  • Higher maintenance costs

  • Increased compliance expenses

A resilient deal remains viable when multiple assumptions worsen simultaneously.

9.4 Comparing multiple deals objectively

Comparisons should use consistent metrics:

  • Net cashflow after costs

  • Cash-on-cash return

  • Risk exposure

  • Management intensity

  • Exit flexibility

Avoid comparing deals on:

  • Headline yield alone

  • Best-case scenarios

  • Anecdotal outcomes

Ranking deals forces trade-offs into the open.

9.5 Knowing when to walk away

Walking away is not failure — it is discipline.

Indicators to walk away:

  • Assumptions keep being adjusted to “make it work”

  • Numbers rely on future market improvement

  • Risks cannot be quantified

  • Complexity outweighs reward

Every deal passed on preserves capital for better opportunities.

Key principle

The goal is not to buy property — the goal is to avoid bad property.

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