Spreadsheets — Video

Are your spreadsheets incredibly accurate and reliable? Ever heard of O’Toole?

 

Transcript:   Hi this is Jeff Brown the “BawldGuy”. Today we’re going to talk about Murphy’s Law, spreadsheets, and real life. So when you do spreadsheets, I know when I do them, I do boots on the ground. I’m old school, I was mentored by some very, very brutally objective mentors who told me you don’t trust anybody’s numbers but your own. You do them with your own boots on the ground in person and you get them right, and then you triple check them to make sure. Now, after telling you all that; you’re going to say, well Jeff thinks his spreadsheets are so reliable. No, not really. Here’s the deal. I know that the numbers are right on mine. I know that I’m getting it exactly what it is. I’m using vacancy rates that I verified. I did rent surveys. I talked to insurance agents. I know what repairs and maintenance are going to be. If you’re buying new properties, which is what I specialize in, you know that your vacancy rates, if you bought in the high quality areas we use, are going to be a little lower because your tenants are going to be higher quality. They’re going to stay longer, etc. etc. Now, all that said. Then there’s Murphy. Now we know what Murphy told us, that if it can go wrong it will and it will be at the worst time. What most people have never heard is O’Toole’s corollary to Murphy’s Law. In one sentence, O’Toole’s said Murphy was an optimist. I like O’Toole and I believe that. Now look, if you’ve got all the cool things, a nine or a ten location, incredibly, relatively speaking, high quality tenants, very low vacancy rates because you’re lucking out at the right time in the market, brand new properties with low expenses. Bottom line is Murphy’s still there. He knows where we live. He’s going to put you in his box sooner or later. So take that spreadsheet, understand that you’re going to have a really decent net operating income, then chuckle, have a beer, take the gross rents and divide by two, and use that number. Not what the spread sheet says. If it’s less than 50 percent on a super well located, brand new property, built better than specs, with all the goodies I mentioned before, and it still screws up? Then we’re all gone because something really bad happened. The idea is do your numbers, apply Murphy, remember what O’Toole said, and then make your decision. If it still works using Murphy and keeping O’Toole in your head, it’s a viable investment. This is Jeff Brown, thanks again. Catch you next time.

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About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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