“Wide diversification is only required
when investors do not understand what they are doing.” Warren Buffett
When looking to invest, you need to know what to buy, when to buy it and
when to keep looking. You want to know whether or not the property pays for
itself, or if the expenses exceed the income. The investment analysis spreadsheet is one of the tools I use when
evaluating a prospective real estate investment for myself, and my wife uses it
to evaluate deals for clients.
When you’re
evaluating a property, how do you know it’s a good deal? And, can you convince others that it is a
good deal, such as potential partners, buyers, lenders or other agents? This spreadsheet has a majority of the
formulas necessary to evaluate an investment, and it will allow you to quickly
enter alternative “what if” scenarios, such as, what if you obtained a 5% interest
rate loan versus a 6% interest rate, or what if your loan term was 99 years
(interest-only loan) instead of 30 years, or what if you increased the rent on
each unit? You get the picture. These
“what if” scenarios will help you evaluate each property based on its
individual circumstances.
Having the ability to quickly analyze a real estate deal will allow you to save time and make more money, because you will make smarter and more profitable investment decisions in a shorter amount of time.
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