What is a Post mortem anyway?

post?mor?tem (p st-m?r t m) adj. 1. Occurring or done after death. 2. Of or relating to a medical examination of a dead body. n. 1. See autopsy. 2. Informal An analysis or review of a finished event. That is the definition you will see in most dictionaries.

We use the term to forensically examine the property that you have purchased, rehabilitated and resold. It is a necessary tool in your administrative toolbox if you want to become a better real estate investor.

The Post-mortem will do the following if you examine it:

1) Show you the way to price your next rehab project down to the penny.

2) Indicate a spike in either goods or labor during the time period.

3) Allow you to correct any deviations in your pricing formula when you purchased the property.

4) Indicate whether you are pricing the resale correctly.

5) Identify training problems.

6) Indicate if you are purchasing the right properties.

7) It is a great tool to show to your lender when you are attempting to finance a property.

Each property you purchase must be examined to indicate whether you are performing your job correctly. How do I do a post-mortem? Well here is the rub? First you have to have a system of pricing in place to examine the results against.

For example a client purchased at auction the property below in Groveport, Ohio on January 20, 2005 and then resold on April 26, 2005, for a profit of just over $19,000 or 20% return. Why would you want to analyze a win like that?

Because the client made several mistakes that can not be repeated if they intend to continue to make profits. So we teach them to analyze everything to make the next deal more lucrative and to get used to having a system.

First they learn to create a summary page. It summarizes the transaction and we usually use this page to show to the lender along with the prediction regarding resale (market index) and our rehabilitation analyzer.

In this situation the home was purchased for $82,150.00 at the auction. Prior to the auction our client had an estimated rehabilitation of $9,700 for the property. In actuality they spent in the neighborhood of $16,000.00! Way out of line with the analyzer. Why were they so off budget? They failed to account for items that were needed. They were over budget on electrical, kitchen, appliances, flooring and failed to account for a new furnace and water heater.

This is simply a training issue or as we call it honest eyes. The client failed to account for items that were required to be in the fix-up budget.

So do yourself a favor and learn to do a post-mortem on every property you purchase. Or let us teach you to perform them.www.blog.frontgateconsulting.com