Real Estate Analysis – How smart investors do it.
Smart investors are using Real Estate Analysis always before and also after they buy a new real estate property. It is essential to use some calculations to find out if the property is worth investing in, and then to see if it is still generating enough profit, to keep holding it.
In earlier days doing the real estate analysis was very difficult and lengthy process of using calculator and papers. Nowadays, luckily we can use spreadsheets on our PC’s and even better and newer way is to use online tools. In this case we don’t even have to own any spreadsheet software and we can just do the whole real estate analysis within the online real estate investment analysis software.
There are many tools on the internet and some of them are better and some of them are also pretty bad. I have done quite an extensive research myself, so I know what I am talking about here. Most of them have some basic real estate ratios – such as cash-on-cash return, return on investment, gross rent multiplier, break even ratio and some mortgage calculations.
However not all of them has the more sophisticated ratios (which actually have much more meaning from the economical point of view) , such as net present value, which is probably the most important one for every investment comparison. Then there is an internal rate of return , which is easier to understand by starting investors. The most important thing about these ratios is that they are counting with the time value of money.
Some of the tools can offer you possibilities of saving your researched properties and even comparing them; that is for sure one of the important features. Ilike when I can even have the properties displayed on a map (ie. google maps) automatically, because as you know Location, Location, Location is just the most important thing in Real Estate. 😉 Therefore it is a good thing to keep an eye not only on the numbers but also on the map, when researching potential properties.