Real Estate Financial Analysis

General Real Estate Investing
1

Hi guys,

I am new to REIClub and just want to check if there is any generic discussion or indeed demand for analysis methods and tools for commercial real estate investment - excel models. It would be good to understand what RE investors will be looking at in 2013 as investment criteria when considering and analysing investment opportunities.

Many thanks.

2

he first step in being able to analyze the value of a rental property is to understand what factors contribute to property value. In general, good financial analysis involves being able to input a bunch of information about your real estate investment into a financial model, and have that model kick out a bunch of information that you can then use to determine whether the investment is a good or a bad one (and whether it is the right investment for you).

3

Sure, do a search for Cap Rates, ROI, Cash on Cash Return, Appreciation, Cash Flow, Adjusted Cost Basis, Cash Flow Basis, DCR, Debt Ratio.

All are okay to great ways to evaluate a deal. You however are going to need to determine which analysis tools are going to be the ones that guide your investment philosophy. I get people asking me, what’s your ROI that you are targeting? Well to me that’s not what I am looking for I am more interested in an IRR.

4

Start with this spreadsheet that you can download from this site. Although this spreadsheet is designed for residental rental property cash flow analysis, it may give you some of the answers you are looking for.

www.reiclub.com/forms/cashflowanalysis.xls

5

if you want to invest you money in the real estate then you should be follow the some instruction

  1. Located in an area where there is a positive population growth.
  2. There is an abundance of employment opportunities within the area.
  3. There’s enough infrastructure developments (current or planned) to support the needs of the community such as transportation facilities and schools.
  4. High rental demand.
  5. There is only a limited supply of properties in the area, to ensure that the demand remains strong.
  6. The suburb has an evident history of strong capital growth.
  7. Purchase a property within the median price range. It will be easier to sell and rent out.
  8. Located in a pleasing and safe environment.
  9. Choose a low?maintenance property. Ensure that the property you’re buying is well?built and free from defects.
  10. Check the availability of shopping centres, parks, nearby beach, sport facilities and other amenities that will make the area
6

I’m actively trying to do the opposite of numbers 6, 7, 8, and 9. Although the homes I’m looking at are in generally safe areas, they certainly aren’t pleasing neighborhoods to look at. :biggrin