Real Estate Investment Analysis Made Easy

by Dave Peniuk

There are plenty of real estate investors that don’t use any spreadsheets or financial calculators to figure out if a property is a good one to buy or not. And with simple rules of thumb like our 1% rule you don’t necessarily need them. But I’ve been doing dances with spreadsheets since I began.

And, I think that doing some good solid analysis on a potential rental property serves many purposes:

  • You can’t get as emotional about the decision if you let the numbers guide you. The numbers either work or they don’t. It doesn’t matter how much you love the property if it doesn’t generate enough cash flow to cover it’s costs and give you a return then it’s not a good deal.
  • Knowing the variables that go into calculating the numbers allows you to identify areas where you can make more money. For example, if you can lower the financing costs or decrease the insurance you can increase your return. These are things you might not see clearly without a spreadsheet in front of you.
  • Allows you to speak and present professionally to your partners, realtors, mortgage brokers and lenders. Nothing like a concise and simply one page summary of the numbers on a property to make someone understand what you’re doing and want to work with you.
  • If you do analysis over time, it allows you to spot trends with your expenses. You can go back and look at your property’s performance over time and find areas to improve it.

Up until now I had created all of our spreadsheets myself. Well, actually Julie programmed the mortgage calculations into a spreadsheet for me but otherwise I created them all myself. And I like them. But they are a bit complicated and definitely not that pretty looking. So when I had the opportunity to test out RealData’s real estate investment analysis software I jumped at it. We’d interviewed the creator and founder of RealData, Frank Gallinelli, in aย  teleseminar a few months ago and he invited us to check out his programs.

Anyway – Julie says I need to create a shorter summary version video instead of the long tutorial like videos I have for you here… but maybe if you’re a detailed kind of person like me you’ll appreciate seeing all the nuts and bolts!! ๐Ÿ™‚

The bottom line is that the RealData Standard Edition product is excellent but pretty comprehensive for most residential real estate investors. Why not save yourself $375 and just get the Express Real Estate Analysis package? It’s got everything you need and more – and for Canadians – it’s even all set up for us with the right amortization tables!!

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The links taking you to the RealData products are in fact affiliate links… and if you choose to purchase the product through those links we will make a small commission for our referral. However, we wouldn’t be recommending it if we didn’t think you’d be smart to buy it!! ๐Ÿ™‚ The Express product is great – and would be a good addition to any real estate investors tool box of resources.

And of course, if you have a problem with the software and the folks at RealData don’t help you out let us know… we know the President of the company. ๐Ÿ™‚

2 Comments

Filed under investing, real estate, Recommended

2 responses to “Real Estate Investment Analysis Made Easy

  1. Nicole

    I have just purchased my first income property and am looking at the different ways to finance. If I go with a variable rate of 2% over 30 years I am looking at a cashflow of $12,000 +/year. If I do a five year fixed at 3.8% my cashflow now goes down to $8,000/year. My goal is to purchase more property this year so I could use the cash – however I don’t want to shoot myself in the foot in 5 years iwht little pay down on my principal. What is the best strategy? I have always been taught to pay down debt asap but know that using opm can be more beneficial if done properly.

  2. Hi Nicole,

    Congrats on buying your first investment property! That’s fantastic. And, it sounds like you’ll have considerable cashflow from that first deal!

    There are many factors to consider when choosing a variable or a fixed mortgage (and you mentioned many of them).

    Without knowing your full situation, I cannot give you too much guidance other than to ask yourself the following questions:
    1 – Are you comfortable with a 1, 2, or even 3% increase in interest rates in the next couple of years (if you go with a variable)
    2 – Do you have any other misc. costs that could occur on the property in the next little while that may be unexpected (overall condition of the building, age of the furnace, roof, structure, etc.)? If you don’t have a reserve or contingency fund set aside for just such emergencies or even for an extended vacancy, you should certainly look into doing that (again, especially if you are in a variable rate and don’t lock-in).
    3 – This is not so much a question, but something to consider – if you are gravitating towards a variable – maybe you should adjust your monthly payments to be similar to as if you were locked into a fixed rate. In other words, you’re only “paying” 2% interest (as long as Prime stays that low), but your payments are based as if you were paying the 3.8% fixed rate. That way, you pay down a lot more of the principal in the early years and help protect against some Prime/Variable rate increases. Furthermore, if at some point in the future you want to increase your cashflow (and as long as the variable hasn’t risen above the 3.8%), you can remove those extra payments and just go back to the variable rate payment. It’s like a hybrid mortgage and you can adjust it depending on your circumstance!

    I hope this helps! Oh, and be sure to switch to our new blog at:
    http://lifeasrealestateinvestors.com
    It has all the same content as this WordPress site, but we now host it so that gives you more advanced features for checking out our posts!

    Cheers

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