11 Things You Want in Real Estate Investment Software

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Real Estate Investment Software

11 Things You Want in Real Estate Investment Software

By James Kobzeff

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Real estate investment software is one of the best tools real estate investors and professionals can use to analyze and evaluate multifamily property.

Here's why.

Good real estate investment software provides the forms, makes the computations, and creates the reports required for a real estate analysis. Any user (experienced or not) can create professional-quality rental property reports for a myriad of reasons, such as decision-making, or as property presentations to buyers, sellers, colleagues, partners, or to lenders. All within minutes.

Moreover, real estate investing is all about the numbers. Therefore, real estate investors who are considering real estate investment opportunities look for and make their investment decisions based upon the bottom line. So real estate investment software becomes an essential tool for real estate analysis because it provides quick and concise cash flow, rate of return, and property valuation numbers.

Though most real estate analysts prefer to buy real estate investment software, it should be pointed out, though, that you do have other options.

You can, for instance, scratch out the numbers with a pad and pencil, or perhaps make a hasty rule-of-thumb calculation off the top of your head. But it should be obvious that these approaches, although maybe useful in limited cases, do not provide the best solution. They clearly do not provide the deep property analysis required to make a smart investment decision, nor do they include the data likely to sway the opinion of any other person, entity, or institution like a partner or lender.

You can also use Excel and develop your own spreadsheet. The problem here is time. It takes countless hours to embed the computations properly, and to format the forms and reports, even if you're familiar with Excel. If you're not familiar with Excel, then triple the time.

Before you pursue those options, though, be mindful that successful real estate professionals do not waste time or effort reinventing the wheel. They prefer to invest in real estate software so they can spend their time generating moneymaking deals.

But I digress. So let's get back on topic and look at what you should expect in good real estate investment software.

1. Easy to learn and use

You want simply to enter the values and have the software do the rest. You never want to look and wonder, "What do I do next?" To check, examine the website. Remember that the same company praising their software publishes the website. If the website is not well organized and informative, or if its lack-luster and confusing, the software might not be what you want.

2. Unlimited units

You want the ability to analyze one unit or a thousand units, or even more units if necessary.

3. Loan amortization

You want ample control over the financing assumptions. For example, you want the ability to enter multiple loans, the flexibility to enter the loan either as a loan assumption or as a new loan, and then have it computed as either a fixed or interest-only rate.

4. Crucial rates of return

You want the real estate investment software to calculate cash flow returns and loan ratios such as cap rate, gross rent multiplier, cash on cash, operating expense ratio, net operating income, debt coverage ratio, loan-to-value ratio, break-even ratio, and profitability index.

5. Tax shelter computations

You want the ability to determine cash flow after tax as well as your tax benefit or loss. To do this, the real estate investment software must include computations for tax shelter elements such as cost recovery and mortgage interest.

6. Time value of money

You want the software to create computations involving the time value of money such as internal rate of return and net present value. Why? Because you will discover that in real estate investing, the timing of cash receipts can be as important as the amount.

7. Concise, top-quality reports

You want printable reports that are easy to read and have eye-catching appeal. Remember, you might be trying to influence the opinion of a buyer, seller, colleague, or lender regarding this property, and they might have to make their decision based on the reports even before seeing the property.

8. Upgradeable versions

You want the ability to "upgrade" from a less-than-platinum-grade-version to a platinum-grade-version without having to re-purchase the platinum-grade version at full retail price.

9. Technical support

You want to have open access to tech support in the event of a question or problem. Preferably, email and telephone support . Exercise caution if the company or developer appears overly allusive--there is nothing more frustrating than encountering a problem and then not being able to talk to the software developer about it.

10. Affordability

You should be able to find very good real estate investment software on the web for about $300. Which is very affordable given the fact that you will be able to start working with income-producing property immediately.

11. Customer satisfaction

You should examine the names, professions, and titles of customers who have submitted a testimonial. If you can relate, then you may have a winner.

There are other things you want real estate investment software to provide such as seamless printing, picture function, branding and name-rider integration, email capability, help file, Windows compatibility, and so on. The point is not to be hasty. Spend time on each website looking around to be sure you get the essentials and perhaps a little extra at the best price possible.

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About the Author

James Kobzeff developed ProAPOD to make real estate investment software easy and affordable for real estate professionals and investors. Discover how you can create cash flow analysis and rate of return presentations in minutes! Go to => http://www.proapod.com

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Article Source: http://EzineArticles.com/?expert=James_Kobzeff
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Net Present Value - How to Use NPV to Evaluate the Price of a Property

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By James Kobzeff

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Net Present Value, is often used by a real estate investor to try to evaluate the price for a rental property with time value of money consideration has undoubtedly used .

Although it should not be used as the only factor to decide whether a real estate investment provides a good buying opportunity, Net Present Value does provide the investor with a quick and easy way to determine whether the price that will be paid for the property will yield the investor's desired rate of return (discount rate).

What is net present value?

NPV is the difference between the present value (PV) of all future cash flows produced by a rental property and the amount of cash investment (or, initial investment; i.e., down payment and closing costs) required to purchase the property. For example, let's assume that the real investor desires a 10% yield on all future cash flows, must invest $100,000 cash to purchase the rental property that might produce those cash flows, and wants to know whether the price he will pay achieves his desired yield. He would calculate NPV.

Here's how it works.

First, all future cash flows would be discounted back at 10% to determine the present value of those cash flows. Secondly, the $100,000 initial investment would be deducted from the PV. The difference between the two is the NPV. For example, if the present value winds up equaling $110,000, the $100,000 would be subtracted to determine a net present value of $10,000 ($110,000 - 100,000 = 10,000). Whereas, if the PV calculates at $90,000, the NPV would be -$10,000 ($90,000 - 100,000 = -10,000).

What does it mean?

Whenever the NPV is greater than zero, it means that the discounted value of the future cash flows is greater than the initial investment. In other words, you're getting a good deal and getting a rate of return that is actually higher than the discount rate you desire (in fact, you can pay $10,000 more for the property and still achieve a 10% yield). Likewise, any NPV less than zero means the opposite. You're getting a lower rate of return than you desire, and would have to pay $10,000 less for the property to get a 10% rate of return.

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About the Author - James R Kobzeff

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James is the developer of ProAPOD, a very affordable real estate investment software solution that includes computations for NPV. Discover how to create rental property analysis presentations with automatic calculations for net present value and other rates of return in minutes! Go to => http://www.proapod.com

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Article Source: http://EzineArticles.com/?expert=James_Kobzeff
http://EzineArticles.com/?How-to-Use-Net-Present-Value-to-Evaluate-Property-rice&id=380974

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Return from this page Net Present Value, using NPV to evaluate the price of a property. Back To the Real Estate Investment Software Page Or To the Home Page Freedom Steps With Property Investing

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APOD - How to Construct an Annual Property Operating Data Statement

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By James Kobzeff

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The APOD (an acronym for "Annual Property Operating Data") is one of the most popular reports in real estate investing because it gives the real estate analyst a quick evaluation of property performance for the first year of ownership. In fact, it would be surprising not to encounter an APOD in the pursuit of real estate investment property because of its popularity.

In daily life, the Annual Property Operating Data essentially serves as the real estate equivalent of an annual income and expense statement, but more in the capacity of a "snapshot" of a property's income and expenses.

Characteristics

• Projects property performance for the first year of ownership only
• Ignores tax shelter consideration
• The bottom line is cash flow before tax (CFBT), not cash flow after tax (CFAT)
• Reveals income, operating expenses, net operating income, debt service, and cash flow concisely and therefore serves investors well as a good "first-glimpse" of the investment opportunity

A well-constructed APOD is best for comprehension, obviously, and the clearer annual property operating data is presented the easier the determination of property performance. In truth, however, the emphasis is on correct numbers, not style. Here's the procedure.

1. Show the Gross Scheduled Income (GSI) This is the income derived from rents and should represent the annual sum of all rents as if the units were 100% occupied. Include an annual rent even for vacant units; you can use any rent you like (perhaps market rent) just as long as it is realistic.
2. Show an amount for vacancy and credit loss Deduct this amount from GSI to compute the Effective Gross Income (or EGI).
3. Show the income generated from other sources (if any) Include things such as laundry income, rents from storage units or garages (if any) and add the total to EGI to compute Gross Operating Income (GOI).
4. Show the individual operating expenses and total Include expenses required to run the property such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management, advertising, landscaping, and so on. Do not include debt service. Compute a total and label it Annual Operating Expenses.
5. Deduct the annual debt service (mortgage payment) from NOI This computes the investment property's bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).
6. Deduct the annual debt service (mortgage payment) from NOI This computes the investment property's bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).

Format of the Annual Property Operating Data statement

Okay, let's consider the entire list from top to bottom so you can see a typical format used in an annual property operating data:

Gross Scheduled Income (GSI) - Vacancy Allowance = Effective Gross Income (EGI) + Other Income = Gross Operating Income (GOI) - Operating Expenses = Net Operating Income (NOI) - Debt Service = Cash Flow Before Tax (CFBT)

Special Features

As stated earlier, an APOD is more about substance (accurate financial data) than it is about style and panache. Nonetheless, annual property operating data that also includes computations for cap rate, gross rent multiplier, price per square foot, and cash on cash return are help. Yes, you can exclude the extra effort to include these computations, but it does create annual property operating data that will make you proud to present to customers and lenders.

Please feel free to preview a sample APOD on our website.

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Recommended Resources:
ProAPOD Real Estate Investment Software: www.proapod.com

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About the author: James R Kobzeff

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James developed ProAPOD Real Estate Investment Software to make rental property cash flow, rates of return, and profitability analysis presentations possible in minutes. Discover all the benefits and reports at www.proapod.com

Article Source: http://EzineArticles.com/?expert=James_Kobzeff
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Return From How to Construct an APOD To Real Estate Investment Software Or go to Freedom Steps With Property Investing

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Lenders Mortgage Insurance
The Secret that
Professional Investors Use

You may have already discovered lenders mortgage insurance (LMI).

Perhaps a loan officer mentioned it in passing during your borrowing capacity assessment interview.

You should always have your finance capacity assessed prior to looking for property. This will do several things for you when looking and evaluating properties.

1. Firstly it will help you to home in on the right property type and price range of property to look at and avoid wasting your time.
   


2. Secondly when you do find a property that fits your property investment criteria
   then you are in a more powerful position. Both in terms of bargaining for the price you will pay negotiiating the terms that suit you best.

Lenders Mortgage Insurance is a Tool

Do not view LMI as an expense to be avoided.

LMI is a very useful tool that will improve your real rate of return or return on equity invested. I will outline the way that this works below.

Because you can borrow more, with your existing financial resources, LMI will also help you progress faster toward acheiving the property investing nirvana that you are seeking. Whether that be total financial independance, extra money to give to the worthy cause of your choice or the knowledge that you have total financial security.

For now just say that if you want to buy a property worth $100,000 then the bank would normally ask you to come up with $20,000 for the deposit. Which is a standard requirement of many banks.

This is where lenders mortgage insurance (LMI) comes into play. Using LMI you can reduce the amount required for the deposit to as low as 5 percent, perhaps less, depending on your financial institution.

LMI is Your Greatest Ally

Many new investors see a request from the bank to use of lenders mortgage insurance as an added expense. An additional cost barrier imposed by the banks to stop you from acheiving your investment goals.

Do not look at it this way. LMI is your friend. Professional investors (this means people like you) see the use of LMI as their greatest ally when it comes to obtaining the finance they need.

As I will show you below LMI is a very useful tool for real estate investors

LMI is a Capitalizable Expense

The great thing about using lenders mortgage insurance is that you can generally add the amount that LMI will cost you on to the amount being financed.

Why is this so beneficial to you?

Because it saves you using your precious available capital or equity. This can make an substantialf difference when you want to move on to your next investment property.

Is LMI a Tax Deduction

Lenders mortgage insurance can be viewed as a cost of doing business.

As such it can be deducted from your gross income when it comes to tax time.*

Your gross income is the rental income from your investment property and any other income you may have to declare in a tax year.

LMI Improves Your Return on Equity Invested

Quite simply put lenders mortgage insurance will improve your return on equity invested by allowing you to invest less equity in each property you buy.

So from the example above, using the standard requirement of the need for a 20% deposit with a $100,000 property. This would give a loan to value ratio of 80% and then your capital requirement would be $20,000. ($100,000 x 20%).

If the value of your property were to go up by 10% in one year to be valued at $110,000 then your net increase would be $10,000.

This equates to a 50% return on equity invested. ($10,000 / $20,000 x 100)

If by the use of lenders mortgage insurance you were able to reduce the deposit requirement ot 5% or $5,000 ($100,000 x 5%) and your property rose in value by the same 10% then ou would have a 200% return on equity invested. ($10,000 / $5,000 x 100) of 80%.

If you had $20,000 to invest you may think great, I'll just pay my $20,000 deposit and get my investment property. But if you used LMI you could lower the capital requirement to just $5,000.

In this case you culd then afford to purchase 4 properties instead of just your original one.

What's an LVR?

For a more detailed explanation see the loan to value retio page here.

For now it is enough to say that banks use your loan to value ratio (LVR) to calculate the level of debt (risk from the banks point of view) that they would be acceptable for a particular asset.

Some banks and financial institutions are more strict on this criteria than others, especially in the light of the sub-prime mortgage crisis that has caused a stir with less than optimally financed properties.

However that will not be you. You are aiming to obtain premium quality financing at terms favourable to you, not the banks.

And this is very acheivable, thousands of people have done it before you and millions more will do it in the future.

The Benefits of LMI - A Summary

In summary, lenders mortgage insurance can reduce your capital outlay requirements, enable you to progress faster with your property investment ambitions and improve your return on investment for any property.

Quick Links:

• Lenders Mortgage Insurance
  
• Borrowing Capacity Assessment
  
• Property Investment Criteria


• Loan to Value Ratio

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