investment formulas? math
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investment formulas? math (by hammer [TN]) Dec 5, 2018 6:02 AM
       investment formulas? math (by NE [PA]) Dec 5, 2018 6:10 AM
       investment formulas? math (by NE [PA]) Dec 5, 2018 6:14 AM
       investment formulas? math (by Robert J [CA]) Dec 5, 2018 6:16 AM
       investment formulas? math (by RB [MI]) Dec 5, 2018 6:30 AM
       investment formulas? math (by S i d [MO]) Dec 5, 2018 8:03 AM
       investment formulas? math (by RichE [IL]) Dec 5, 2018 12:37 PM
       investment formulas? math (by Chris [CT]) Dec 5, 2018 1:01 PM
       investment formulas? math (by tbird [KY]) Dec 5, 2018 6:12 PM
       investment formulas? math (by tbird [KY]) Dec 5, 2018 6:12 PM
       investment formulas? math (by hammer [TN]) Dec 6, 2018 5:55 AM
       investment formulas? math (by Pmh [TX]) Dec 6, 2018 2:23 PM
       investment formulas? math (by Bit [IN]) Dec 7, 2018 7:43 AM
       investment formulas? math (by Ray-N-Pa [PA]) Dec 7, 2018 7:27 PM

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investment formulas? math (by hammer [TN]) Posted on: Dec 5, 2018 6:02 AM
Message:

SMokes post got me thinking.

Can somebody list the math formulas they use when evaluating properties?

Rank them in order of importance?

Here is what I have been looking at.

ROI (return on investment) Purchase price of property/Gross income

ROCI (return on cash invested) Cash paid/Gross

NETROI (net return on investment) Total paid purchase+repairs/yearly NET income

NET ROCI Cash paid+repairs/yearly net income

Net Equity = Market value of house - note payoff - repairs necessary for market value

Payoff timeline.

Vacancy rate for each property

Desirability rating for each property (rental demand for each unit)

--137.119.xxx.xx




investment formulas? math (by NE [PA]) Posted on: Dec 5, 2018 6:10 AM
Message:

Rent-expenses = cashflow.

That's all mine is for rentals. All it has ever been and probably all it ever will be.

I like simple and I've ran the numbers on a napkin at a coffee shop before.

If I can't figure out the property like that without having spreadsheets and software and gizmos, I don't want it.

The only thing that has changed is now I want more cashflow per unit monthly than I did when I first started. --50.32.xxx.xxx




investment formulas? math (by NE [PA]) Posted on: Dec 5, 2018 6:14 AM
Message:

Actually, to be 100% honest with you, the last handful of properties I have purchased, I haven't even ran the numbers on. You just get to a point where you know. --50.32.xxx.xxx




investment formulas? math (by Robert J [CA]) Posted on: Dec 5, 2018 6:16 AM
Message:

In many markets the competition to purchase income property is fierce. Anything that pencils out as a "good" investment will attract many bidders. So when I look for a deal, I look the potential and added value I can add to something that will increase the rental income and value.

The size of a property is important. People like space. The cost vs value for any updates/remodels.

For example, everyone would like to rent or own a 4+2 home vs a 2+1 home. By owning only 2 bedroom you loose over 60% of the rental pool. I purchased a 2+1 for a song and converted the garage into a master suit with a walk in close and large full bathroom. Then I built a covered carport for a song over an existing concrete pad in the back yard for tenants two vehicles. Now I have a large 3+2 with a convertible den that can act as a 4th bedroom when necessary. Instead of spending $400,000 for a 4+2 I spend $200,000 plus $25,000 (total of $225,000) and can rent the home for the same price as a 4+2 costing me almost half the price doubling my return on investment. I can also refinance or sell this home making a large profit. --47.156.xx.xx




investment formulas? math (by RB [MI]) Posted on: Dec 5, 2018 6:30 AM
Message:

Right on, NE.

(Except my use of Bar Napkins) --184.53.x.xx




investment formulas? math (by S i d [MO]) Posted on: Dec 5, 2018 8:03 AM
Message:

I like the cash flow to return my entire investment in 7 years or less. This includes purchase, closing, rehab.

Like NE and RB said, after awhile you get a general good feeling if you stay invested in an area.

Example: I know if I can get a house for $25K "all in" and it brings in $550/month base rent, I'll have all my money back in less than 7 years.

Income - 50% of income for expenses = monthly profit.

($550 - $275) * 84 months = $23,100. Along the way I typically pick up several pet fees, keep expenses down and get additional income from lease change fees, late fees, expedited deposit return fees, and other misc that brings me up to $25K.

Rinse and repeat.

--173.20.xxx.xxx




investment formulas? math (by RichE [IL]) Posted on: Dec 5, 2018 12:37 PM
Message:

NPV will always lead to the correct evaluation in both mutually exclusive and independent projects. The trick is determining the cash flows in each period and the appropriate discount rate. --67.186.xxx.xxx




investment formulas? math (by Chris [CT]) Posted on: Dec 5, 2018 1:01 PM
Message:

Just whatever makes money, I don't have a formula. --24.187.xxx.xx




investment formulas? math (by tbird [KY]) Posted on: Dec 5, 2018 6:12 PM
Message:

Very rough figures to If an almost new property...I could accept as little as 1% of purchase price as monthly rent.

If an average property...2%

If a low end unit...3%

Done in reverse... if very low end property: figure out what I can get in monthly rent...and I can pay up to 33 times that amount. Average property... 50 times. Nice, newer property- 100 times.

--70.92.xx.xx




investment formulas? math (by tbird [KY]) Posted on: Dec 5, 2018 6:12 PM
Message:

Very rough figures to If an almost new property...I could accept as little as 1% of purchase price as monthly rent.

If an average property...2%

If a low end unit...3%

Done in reverse... if very low end property: figure out what I can get in monthly rent...and I can pay up to 33 times that amount. Average property... 50 times. Nice, newer property- 100 times.

--70.92.xx.xx




investment formulas? math (by hammer [TN]) Posted on: Dec 6, 2018 5:55 AM
Message:

In my regular life job, I learned that the hardest part is getting a new customer. Once you get one, how can you maximize your sales/returns from that customer?

With rentals its the same way.

Getting a good/better deal on the front end can cut years off your Return on investment.

Ex. Rental brings $500/mo. IF I can get the purchase price down $10k then I can pay off the property 20 months sooner, if you figure in expenses/vacancy etc... its really more like 40 months. Thats about 3.4 years faster.

Most LL focus on getting rent which is good.

BUT shaving 3.4 years off your payoff is putting frosting on the cake.

Cutting monthly expenses is adding a cherry.

Increasing revenue through value added options, fees, and other services is a nice glass of milk with that cake.

Using the various formulas allows you to see how much those changes can impact your returns and help make the decision to make changes or not. --137.119.xxx.xx




investment formulas? math (by Pmh [TX]) Posted on: Dec 6, 2018 2:23 PM
Message:

My target is not playback in 7 years like Sid has. good for him. cheap houses & high rents. I can understand cheap houses in MO but high rents (?) --104.218.xxx.xx




investment formulas? math (by Bit [IN]) Posted on: Dec 7, 2018 7:43 AM
Message:

The rent minus expenses including stuff like repairs and CAPEX that may go into a bank account. The if the cashflow is good enough I look at the ROI of what I would have to put in it. I also consider my all in and the ARV. --74.130.xxx.xxx




investment formulas? math (by Ray-N-Pa [PA]) Posted on: Dec 7, 2018 7:27 PM
Message:

Highest and best offer = ARV times 65% minus the repair cost to obtain ARV condition (if you plan on not holding this place for a while). You can make the offer at 70% if this is a buy and hold place. --72.23.xxx.xx



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