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Sharpen Your Real Estate Analysis with the Whetstone Tool

Grant Kemp from introduces the powerful tool, the Whetstone, designed to enhance your real estate analysis skills. By practicing with this tool, you can become proficient in deal analysis, making the process intuitive and straightforward when a real deal comes along. Here’s a step-by-step guide on how to use the Whetstone effectively.

What is the Whetstone?

A Tool for Sharpening Your Skills

The Whetstone is designed to help you practice real estate deal analysis. By coming up with various scenarios and numbers, you can sharpen your skills, making you more confident when analyzing actual deals. The practice should mimic real-world conditions so that when a real deal comes, it feels just like practice.

Why Use the Whetstone?

  • Practice Like You Play: Get used to analyzing deals in a familiar format.
  • Consistency: Numbers are always placed in the same position, making it easier to analyze quickly.
  • Sharpening Skills: Regular practice with the Whetstone will improve your ability to evaluate deals swiftly and accurately.

Choosing a Property for Analysis

  1. Visit Your County Property Appraiser Site: Look up a random street name in a relevant area. For instance, you can use a property on Rex Lane in Garland with a value of around $128,240.
  2. Select a Property: Pick houses with various values—some around $80,000 and others up to $250,000 to get a wide range of practice.

Entering Property Details

ARV (After Repair Value)

  • Use the appraised value from the property site for practice purposes. For a real lead, you will use a comped value.

Rental Comp

  • Typically, rental comps are between 0.75% and 1.25% of the ARV. For easier calculations, you can use 1%.

Underlying Lien Details

  • Remaining Principal: Make up a number, such as $102,000.
  • Interest Rate: Choose a rate between 3.5% and 6.5%, like 4.5%.
  • Remaining Term: Estimate the number of years left on the mortgage, such as 22 years.

Calculate Underlying Payment

  • Use the 10b2 calculator to find the underlying lien payment.

Additional Details

  • Missed Payments: Estimate the amount the seller is behind, e.g., $8,000.
  • Repair Costs: Estimate the repair costs, e.g., $7,000.

Potential Cash Contract Price

  • Cash contract price is typically 75% of ARV minus repairs. For example, if the ARV is $128,000, the cash contract price might be around $89,000 (which may not work if there’s a significant underlying lien).

Analyzing the Wholesale Deal

Wholesale Sales Price

  • Typically, you can sell at 80-82% of the ARV minus repairs. For practice, use 80%.

Owner Financed Sales Price

  • Use between 105% and 110% of retail price for owner-financed deals. For conservative estimates, use 100%.

Agent Commissions

  • Typically, agent commissions are 3%. An easy way to calculate this is to use 1% and multiply by three.

Analyzing the Owner Financed Deal

Down Payment

  • The standard down payment is 10% of the sales price. For a $128,000 house, this would be $12,800.

Loan Amount

  • The loan amount is the sales price minus the down payment. So, $128,000 – $12,800 = $115,200.


  • Use 30 years (360 months) for amortization.

Interest Rate

  • The typical interest rate for owner-financed deals is 9.5%.

Calculate Principal & Interest Payment

  • Use the 10b2 calculator to find the principal and interest payment.

Escrow Details

Annual Taxes

  • Use the total estimated taxes from the property site. For example, if taxes are $3,615 per year, input that number.

Annual Insurance

  • Annual insurance is typically 1.5% of the loan amount. For a loan of $115,200, insurance would be $1,728.


  • PMI/MIP is around 0.5% to 1% of the original loan amount. For a $115,000 loan, PMI might be $575. This cost cannot be passed to the buyer; it’s absorbed by you.

Calculate Total Annual Escrow

  • Add taxes, insurance, and PMI to get the total annual escrow. Divide this number by 12 to get the monthly escrow payment.

Analyzing Profits

Potential Retail Net Profits

  • Typically, you walk away with 93% of the ARV. For example, if your ARV is $128,000, you’d walk away with approximately $115,000. However, for properties with significant underlying liens, this might not be feasible.

Wholesale Net Profits

  • Compare the cash contract price with the wholesale price. If you can’t buy wholesale, note that as a limitation.

Owner Financed Down Payment Net Profit

  • Down payment received: $12,800.
  • Subtract costs like $7,000 for repairs, $8,000 for missed payments, and $3,840 for agent commissions.
  • This might result in a net negative initially, such as -$6,040.

Owner Finance Cash Flow Net Profit

  • Subtract the underlying lien principal + interest payment from the owner-financed principal + interest payment to get the monthly cash flow.

Equity Calculation

  • Equity equals the owner-financed loan amount minus the underlying lien.

Months to Recoup Costs

  • Divide initial cost by monthly cash flow to find the number of months needed to recoup costs. If your initial net negative is $6,040 and your monthly cash flow is around $359, it takes roughly 17 months to recoup.

Total Net Income Over Life of Loan

  • Calculate the total expected income from cash flow over the life of the loan for long-term projections.

Key Takeaways

The Whetstone tool, as introduced by Grant Kemp from, is an invaluable resource for honing your real estate analysis skills. By consistently practicing with this tool, you can transform the complex task of deal analysis into a seamless and intuitive process. Whether you’re calculating ARVs, assessing repair costs, or evaluating potential profits from wholesale and owner-financed deals, the Whetstone provides a structured approach to mastering these essential aspects. Regular use of this tool not only sharpens your analytical abilities but also builds the confidence needed to tackle real-world deals with precision and ease. Start integrating the Whetstone into your practice routine and elevate your real estate game to new heights.

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