I would like to start finding deals that would generate a rate of return of say 15% or more for fellow investors. That way, it would be much easier to find angel investors or even if I couldn’t find enough capital, I could still find a hard money lender who could lend on interest rates in the low teens and still make a tiny margin. My only problem is I don’t know how to calculate all this. Does anybody here have an Excel spreadsheet they could share? This is still very new to me but I am very determined to make this happen. I just need to know that I am calculating the figures right when I run the numbers on a deal and want to find investors.
Read the june 16 2008 issue of Rich karlgaad's column on math in forbes magazine. It talks about the lack of math skills in modern America. Everything you need to crunch the numbers are 1. your brain 2. Calculator 3. pencil and paper. When my dad started buying real estate in 1939 all he had was his brain and pencil and paper. Yes he was able to go into as much detail as (or to much detail , perhaps) any bankers or fellow investors needed. I realized how much easier his investing work was compaired to us in the modern day. He had way more time to devote to the important things in life , not "working on the computer" like so many of us now. I find most investment deals of any kind fall apart in the numbers faze ( i.e. the mortgage melt down, to little cash flow supporting to much debt service) We as investors need to understand math much better.
HOWEVER!!!!!!
I understand how everyone likes to look at visually eye appealling computer generated documents and that this will make selling your project more compelling, try these:
Calculating the rate of return on an investment is a fundamental requirement of successful real estate investing. You should be able to do this without using a computer, a calculator is okay. Just google rate of return and you will find all the definitions, formulas and even calculators you will need.
thank you for the advice, links and phone numbers. I will do more research based on your advise.
I apologize for my newbie questions. I guess I missed that math class where they covered IRR, cash on cash return and dscr along with mezz financing/seller carry back scenarios. Oh, and possibly that other class where they cover if investors want monthly distributions or if they prefer to be paid at closing.