Property Analysis software

[RentMaster]

I agree with Drelly.
I use an even simpler formula. (Rent x 52) / purchase price
Not exactly rocket science, but if you use the same formula for each property then you have something to compare them with. Dont even need excel.

There is too many variable in future that you cant control such as interest rates, inflation rates, vacancy rates, bad tenants, good tenants, earthquakes, terrorists etc. Doing a sophisticated calculation can only tell you about the situation now. 1 year from now things can be completely different and those calculations you did are no use.

I prefer to work out what I can afford to pay (rent income compared with mortgage payments etc) and make all these numbers conservative assuming the worst. This depending on your level of preferred risk.

[Monid]

I personally just use an excel spreadsheet which I made myself to take account of basically the expenses and incomes associated with a property. If it doesnt turn out cashflow positive according to that then we don't bother looking any further. If it is cashflow positive then our next move is to try and assess what is wrong with it!

So I think these formulas are dangerous as DRelly points out when they make up the whole decision, but useful as a prequalifying criteria.

David

[drelly]

I think everyone has some numbers they run which will change depending on current interest rates and so on... I also use Rentmasters approach and try to get a minimum 8% gross return on 52 weeks rent (dreams are free!). Although this figure will have to increase for my next purchase the way rates are going. Some of my mortgages were on 6% interest when I was doing this.

Another calculation I have used is a percentage return over the interest only costs... I've aimed for 30-40% before...

eg (this was an actual deal I did by the way):
You 100% finance a 96k house at 7% = $6720 in interest.
Rent is $180 per week = $9360

9360/6720 = 1.39 or a 39% margin over the interest only costs.

Once again, it always comes back to the practical realities of a purchase rather than the numbers.

[fudosan]

I totally agree that the calcuation is only part (not the ONLY) of the purchase decision. If you do not have time to do a detailed cashflow analysis, you can do a a quick calculation as follows:

Rent x 50 / Purchase Price = Yield
(2 week vacancy allowance)

If the yield is greater than interest rate+2%, then it is likely cashflow positive and further investigation (e.g. qualitative aspects) is justified.

[whitt]

Like others i agree that paying excessive for software that is only a glossy excell spreadsheet is a waste of $. Use a pencil and calculator.

Having said that I modified and have a accurate excell spreadsheet i use for myself which suits my stratergies. Cost me nothing to write and outperforms many on the market selling at excessive prices.

The old fashion way of using pencil and calculator does teach you the fundamentals of number crunching an important factor in investing.

[Marcus]

HI Roders
QED Reporting Services provide a property anlaysis service for $30.00
You fill in a questionairre with the data and assumptions you have for a particular property and they provide a report showing the effect on your wealth, cashflows in/ out and when, and rate of return.

What the hell, I’ll do it for $20.
Seriously though. Yes, the numbers are important. Yes you need to get them right. But as Dave pointed out, they should only account for one of your points on your criteria check list.

Buying purely on numbers may (or may not) get you from 0-130 properties in 3.5yrs, but you may (or may not) go from sane to insane dealing with the headaches associated with the tenants those types of properties attract.

Thanks Drelly for your observation!
Like any endeavour in life, we are not all blessed with complete and utter knowledge of every subject. Its all about life experiences and learning. PI is no different and as my degrees don't include accounting I'm keen to listen and take advise from seasoned PI'ers.

Good on you for putting your hand up and asking the question (it’s the best way to get an answer). Perhaps it may be a good idea for you to seek the help of a mentor or property investing coach to get you started. The $200 - $1400 you were looking to spend on a program may cover some or all your costs to getting started. They could help you with goals, strategies and assess your personal situation to get you off on the right foot.

Additionally I find it interesting that leading investors recommend having an accountant look over the numbers prior to going unconditional. I understand software is very detailed and runs numerous scenarios hence my point of being a major time saver and minimise the human error factor.

Dolf pointed out how crucial mistakes could be avoided by using his software too, as I imagine Jan Somers, Phil Jones, etc. would…… You get my picture?

For those who offer constructive help, thank you.

The majority, if not all of us commenting here, do so freely and without bias. Whether you do or don’t buy software matters little to me at the end of the day so long as you are happy. If we can add value to your experience (and others) here is what matters.

Regards,
Marcus.

[roders]

Thanks Marcus for your comments.
I must admit I’m staggered by the response to this, my first forum. What a fantastic site to tap into the wealth of advise from investors like yourself and the others. Some very interesting points raised and all very much appreciated.

Regards
Rod

[cat]

Hey Roders!

bad luck on missing out on the auction. Maybe Regan can sell you a copy direct?

Cat

[regan]

can sell you a copy direct?

Sorry, but it's going going goooooooooooooooooooooone.

Gave up trying to run PC software on a Mac. It worked well, but it was just so slow running under virtual pc (see my posts in the esc forum). ESC wouldn't bring out a mac version (no matter how many times I suggested it would be a great idea), and I couldn't bring myself to buy a pc... so on the auction site it went!

Regan

[ChiefWigum]

Drelly, you're spot on. Designing your own customized Excel spreadsheet is a great way to go: it's just simple calculations when analyzing the mathmatical side of the decision. Plus you get a much better understanding of investing and analyzing deals. Why pay hundreds of dollars when you can learn along the way with your own spreadsheet. Of course, I'm only referring to the 'numbers' side of investing in property.

Regards.