How To Avoid Paying For Real Estate Investment Software When Doing a Rental Property Analysis

If you would like to have a real estate analysis solution without having to invest in a third-party real estate analysis software program, then there is certainly a way for you to accomplish this. Rental property cash flow, rates of return, and profitability analysis and marketing reports can be produced by anybody possessing a spreadsheet application and plenty of time and patience to do it by hand. It's not easy, in fact it's a major undertaking, but it is free when you do it on your own (well sort of if you don't count your man-hours) .

The Spreadsheet Application

1) To start with you must invest in a spreadsheet software program. In this case the obvious selection is going to be MS Excel. Microsoft Excel consists of loads of built-in formulas and functionality which make it the most-widely used spreadsheet in the universe so you won't regret the investment. MS Excel may be acquired alone for about $100 but is routinely included with Microsoft Office. For those of you who are Mac computer users, install MS Office 4 or Office 2011 (both programs are supported by Microsoft for MAC computers).

2) Get acquainted with the Excel application. Find out what makes up a "cell" as well as how to format the cell. You certainly will need to make a decision whether the information entered into the cell ought to be considered as text, a number, or percentage, and whether you'd like the number to feature a dollar or percentage sign, commas inserted for each 100, and how far right of the decimal point you'd like to carry your numbers. Likewise you must take into consideration such factors as background colors and shades, borders, font-size style, and cell dimensions.

None of this is trivial and will be incredibly useful as soon as you get started creating the documents you want to include as presentation content for your real estate analysis.

3) Learn the way to use Excel's formulations. One of the great benefits of working with MS Excel is that it includes a wide-range of built-in functions that automatically compute such things as PMT (a mortgage payment) and IRR (an internal rate of return) all based upon specific criteria. The only problem is that the formulas don't consistently produce the result envisioned. For instance, some times a number has to become a negative for the formula to calculate correctly (which is not actually disclosed by Microsoft). So it's time and experience.

4) You will have to decide upon and learn how to construct the layout for the real estate investing reports you are going to use to present your analysis data. Structure is important. Of course you want want your reports to be comprehensible, but you also want them to look good. There are samples of these reports provided on the web you can preview for ideas.

5) Get educated about VBA (Visual Basics for Applications). This is Excel's computer language for writing procedures (macros) executed in the application. For instance, you would rely on macros to build the toolbar, and then to do something when a certain portion of the toolbar is clicked (e.g., a picture command that would enable you to choose an image from their computer and then automatically paste it into one or more reports).

You really don't have to incorporate macros into your program if you choose not to learn it. But it will give you a number of benefits you cannot enjoy otherwise.

Real Estate Investing

1) Consider what data your program must include for you to create a sound real estate analysis. Put simply, how deep do you intend for your evaluation to go? Are you planning to include the aspects of tax shelter to help you examine cash flows and rates of return after taxes, or are you content to disregard income taxes entirely? What about the time value of money, are you going to be considering returns such as internal rate of return (IRR)?

2) You must learn the formulas for all the returns you intend to include otherwise you are sunk even before you leave port. At the very least you want to be able to calculate gross scheduled income, net operating income, cash flow before taxes (CFBT), cap rate, gross rent multiplier, and cash-on-cash return. If you opt to include elements surrounding taxation, then also learn how to make the calculations for depreciation, amortized loan points, mortgage interest, and tax liability. Certainly there is much more, but you get the idea.

3) You must make a decision about what reports you want to include. At the very minimum you will want to make an APOD and Proforma Income Statement because these give solid details regarding both, the property's first-year and long-term financial performance. But there are many additional reports you might also wish to consider like a rent roll, executive summary, and sales proceeds report for example.

Here's to your success, and may your real estate analysis spreadsheet serve you well.


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James Kobzeff is the developer of ProAPOD - superior real estate investment analysis software solutions nationwide since 2000. Create rental property cash flow, rate of return, and profitability analysis and marketing presentations in minutes! Easy-to-use and affordable. Learn more => www.proapod.com