Real estate investors use a variety of mathematical tools to analyze the performance of their investment properties. We've taken some of the most popular ones and explain their purpose and how to do these real estate investment calculations.
Once you've learned about them, download the spreadsheets. One is the Real Estate Investment Calculator Sheet, and the other is the same sheet with sample data in it to show you formats.
1. Gross Potential Income
Gross potential income is the expected income a property will produce without deductions for expected vacancy or credit loss.
2. Gross Operating Income
This calculation takes into account losses due to vacancy and non-payment.
3. Gross Rental Multiplier
Though not the most precise of tools, the GRM can give you a quick comparison tool to decide on whether to do a more thorough analysis.
4. Net Operating Income
Here we throw in the operating expenses, such as management, repairs, janitorial, etc. for our NOI.
5. Capitalization Rate
By using other properties' operating income and recent sold prices, the capitalization rate is determined and then applied to the property in question to determine current value based on income.
6. Cash Flow Before Taxes (CFBT)
We take net operating income and subtract capital cash expenditures as well as debt service, add back loan proceeds and interest income.
7. Cash Flow After Taxes (CFAT)
This one is easy, as it's the CFBT with taxes subtracted.
8. Break-Even Ratio
Add Debt Service to Operating Expenses and divide by Operating Income.
9. Return on Equity - Year One
This is the percentage return on your cash investment the first year.
10. Get the Real Estate Investment Calculator Sheets
11. Join The Real Estate Investment Forum
We now have a forum for real estate investors to discuss strategies, share knowledge and have fun talking real estate investment.
http://realestate.about.com/od/knowthemath/tp/financial_calcu.htm
http://realestate.about.com/od/knowthemath/tp/financial_calcu.htm