Do You Understand Time Value of Money?

In this article, I want to acquaint you with the concept of time value of money and show you why it is important when real estate investing.Time value of money is the concept of measuring the value of money over time because it is essentially a fact that money does not remain static and over time does change value.

The money in your checking account, for example, is more likely to buy you more goods and services today than it will next year due to inflation alone. In other words, you should not expect to enjoy the same purchasing power next year as you would today because over time the value of your money will likely decrease.

Understanding time value of money, therefore, is crucial to real estate investing.

This is why real estate investors try so desperately to measure and solve for those changes with such elements as internal rate of return and net present value. Because money is not static, and likely will change in value over time, a prudent real estate investor will always measure cash flows and rates of return with consideration for time value money.

ProAPOD has Modified it’s Site Again

The ProAPOD real estate investment software website has again been modified in order to highlight it’s real estate investing software solutions to visitors who are looking for real estate investment software.

As a result, the current customer login has been relocated from the side menu to the top navigation toolbar.

If you are are current ProAPOD real estate software solution customer, please login to your account from the top toolbar at ProAPOD’s webpage labeled Login.

Purchasing Multifamily and Commercial Properties

Although many investors who get their start in the single family realm never aspire to bigger and better things for various personal reasons, there are those for whom eventually dealing with larger properties seems like a natural progression for their business practices to take. If you are one of these entrepreneurs, you shouldn’t let a fear of the process of purchasing multifamily and commercial properties hold you back from stepping up to the new challenge when you are ready.

This is simply a different realm of investing, meaning a slightly different game to play, but one that is in many ways no more complicated or risky than the single family game, and which is definitely more rewarding in terms of the profits produced versus the time spent. With a little patience and time spent studying, the rules of the commercial real estate game are surely within your grasp.

Value, as defined in the world of commercial real estate, is based on a property’s current cash flow, taking into account any deferred maintenance issues that need to be addressed. When negotiating in this world the key principle is that you buy at wholesale price, not retail. The wholesale price is the price justified by the property’s current condition, including income, expenses, deferred maintenance, and your desired cap rate.

When calculating cash flow and cap rate always remember to factor in ALL expenses: mortgage payments, including principal, interest, taxes, and insurance, vacancy, maintenance, utilities, management, and any other specific expenses related to the property. Be very thorough with your due diligence and inspections. And never base your offer on pro forma cash flow figures.

Pro forma rates are figures projected into the future. Remember that “pro forma” means “imaginary”. As for the target cap rate you choose, this can be a point of negotiation but is somewhat dependent upon appreciation. The lower the appreciation, the higher the cap rate you should demand, and the higher the appreciation, the lower the cap rate you should accept.

Financing works differently in the commercial world than in the single family realm as well. The main difference is that it is the property that needs to qualify for financing, not the buyer. This is actually a very good thing because it means that the credit history of the person or entity making the purchase is irrelevant, and that you have the safety net of having the deal scrutinized by a lender to make sure the purchase is a justifiable outlay of capital.

Another important difference is that lenders rarely fund more than seventy percent of the purchase price for these types of transactions. Therefore you should always ask the seller to carry a second mortgage for as much of the difference as possible in order to minimize your out of pocket expenses.

Finally, understand that increasing value is the name of the game with commercial properties. You should have a plan ready to implement following the purchase for how to increase the property’s cash flow and thus its value by decreasing vacancy, increasing rental value, and decreasing other expenses associated with the property.

 

Considering Appraisals For Real Estate Investing

It is often overwhelming to someone to manage Investments, terms and loans, the processes and other parts of real estate when he has not not undergone training or degree in real estate. Whatever you may be looking at- the definitions and actions, beyond those actions, one thing that you should not forget, and that is getting the right appraisals. This will help you if you are to look for the right investments in real estate. This is a big factor for you to succeed in real estate investment.

When we talk of appraisals, it is a thing that consists of a professional idea that is designed for properties. Anchored to this idea re various factors that let for the making of statements. In totality, the appraisals provides conclusion of what market value could mean. And if the market value can not define that easy, then certain person can look at various parts of the property and then determine what they believe the market value should be. Commonly, this process is done by inspector looking for different mechanism.

For you additional information on why we talk about appraisals is that it is a necessary requirement when a person wants to join into selling a home or wants his property to be insured or financed. It may use several external resources and definitions of what market value may include in relation to the opinion being made in order to determine the price value of a home. In this process, you are certain that when you are to join in real estate investing, you feel that you are in the right track.

During the process of getting an appraisals, it is expected that the estimates of your property will be based on several factors that are related to the market and its current condition. These factors certainly can affect the condition of your property. For example, instead of just examining the parts of your property, the person who examines may conduct an inspections on your neighborhood also. This strategy will give them a clear picture of the true value of your property. Things around your property can also be considered as worth property that can be anchored to yours. Example, your property could be inside the commercial area.

By bringing the real estate property to appraisals, you will surely understand how much is the worth of it in connection to your needs and in relation to everything around your property. By remembering and observing the standards that are imposed outside or inside, you will be able to know and have the capacity to determine the specific time and market conditions for you to perform things related to real estate investing. By observing the standards that are set both inside and outside, you will have the ability to know when the timing is right to get involved with your piece of real estate.

 

Get Our Mortgage Calculator Software FREE!

ProAPOD Mortgage Calculator Software enables you to make mortgage payment, time value of money, and cash flow computations in seconds without having to resort to a hand-held calculator that is both time consuming and difficult.

Actually, we designed this calculator software to mimic the complex financial and mortgage calculations found in expensive hand-held HP financial calculators. But unlike hand-held calculators which require numerous entries (with the aid of a manual, by the way), our software makes the same mortgage, time value of money, and cash flow calculations with just a couple of entries in a user-friendly form!

Here’s just a sampling of the computations you can make:

  • Monthly mortgage payment
  • Bi-weekly and additional payment interest savings
  • Desired payment
  • Acquisition cost and sales proceeds
  • Amortization schedules and loan-to-interest table
  • Savings, investment planning
  • Sinking fund
  • Present value – future Value
  • Internal rate of return (IRR)
  • Net present value (NPV)
  • Financial management rate of return (FMMR)

Plus, there are printable reports (something you do not get with a hand-held calculator).

  • Monthly Amortization Schedule
  • Annual Amortization Schedule
  • Loan-to-Interest Table
  • Present Value/Future Value Table

Our mortgage calculator software sells for $29.95, but you will get it FREE when you purchase one of our real estate investment software solutions. Including, ProAPOD 10.0 Executive Software (in-depth rental property analysis for those more serious about real estate investing), ProAPOD 6.0 Agent Software (for real estate agents who want to only work with investment property occasionally), and ProAPOD 4.0 Investor Software (for new real estate investors more intent on determining the profitability of an investment opportunity before they make the acquisition). Learn more at => www.proapod.com

Real Estate Investing Requires You to Run the Numbers

Once you decide to work with real estate investing, it doesn’t matter whether you’re an experienced or beginner real estate investor or agent, you must develop a proficiency for measuring such basics as rates of return, cash flows, and estimates of value associated with investment properties.

If you don’t develop that proficiency, then you’re just guessing whether a specific income property is profitable, meets with your investment objectives or those of your customers, and at the end of the day will become a moneymaker.

Bear in mind that real estate investing is not an emotional matter (physical aspects of the rental property are secondary). Real estate investing concerns buying the property’s anticipated economic benefits (i.e., the income stream) with the intention of making a profitable return on investment, and you must be able to examine revenue streams along with expenses, net operating income and cash flows carefully with some serious number crunching before you can make a prudent purchase, or advise your customer to do so.

ProAPOD real estate investing software makes it easy to run the numbers adequately so you can measure a property’s vital signs and judge its health as an investment opportunity. With our software, you can create rental property cash flow, rates of return, and profitability analysis presentations in minutes! Learn more about ProAPOD at => www.proapod.com.