ProAPOD Real Estate Investment Software Updated!

Dear ProAPOD Customer, I want you to know that I have been working the past several months updating ProAPOD Executive 10.0 AND ProAPOD Agent 6.0 and have it ready for you to download. Here’s just a sampling of what we now include.

PROAPOD EXECUTIVE 10.0 – RELEASED 6/25/10

1. The operating expenses shown in the Rent Scenarios is no longer computed as the percent of GOI for each rent scenario. Instead, the program now looks at the way you entered the operating expenses (i.e., as an actual dollar amount or percent of GOI) and then carries-forward the actual dollar amounts entered and changes only those entered as a percentage of GOI. In other words, costs like property taxes (which are not affected by rents) remains the same in all three scenarios and only things like property management (which are typically affected by rents) are recomputed according to the new GOI created by the scenarios. A great suggestion made by a customer.

2. The Rent Scenarios has also been modified to include a deduction for non-funded upgrades made during the first-year. In other words, when upgrades are made out-of-pocket the result is a lesser cash flow now reflected in the Rent Scenarios analysis with the appropriate returns and measures.

3. Non-funded upgrades made during the first three years are also now reflected as a cash flow deduction in the Monthly Cash Flow report. For example, if you assume an out-of-pocket upgrade in the second month of the second year, the program will deduct that amount from the corresponding cash flow for that month and year.

Recent Other 10.0 Updates:

4. The ability to “step” the vacancy rate for the Proforma Income Statement. Rather than using just one vacancy rate for all ten years, you are now able to make two adjustments to the vacancy rate for your revenue projections. For example, you can now show 15% vacancy in the first year, 10% in the second year, and 5% starting in the third year. This was suggested by a customer who works with “fixer-uppers”.

5. The ability to “step” income and expenses for the Proforma Income Statement. Just like the vacancy rate (explained above) you can make two adjustments for income and expenses for your revenue projections.

6. The ability to select your currency symbol. In addition to using a dollar symbol on our forms and reports (our default setting), analysts in different countries now have the option of also selecting a Euro, Pound, Rand or Yen symbol.

7. The ability to select between “passive losses carried forward” (our default setting) and “losses taken currently” for the Proforma Income Statement. This was suggested by a customer who prefers to make revenue projections based upon either method.

PROAPOD AGENT 6.0 – RELEASED 6/17/10

1. An entry for property upgrades. This allows you to include an amount for upgrade costs (i.e., painting, carpeting, roofing, and so on) in addition to the property’s operating expenses. This way you can show any one-time cost separate from ongoing costs required to run the property. It is revealed in the APOD, Rent Scenarios, and Proforma Income Statement.

2. A line item in the Proforma Income Statement that shows the investor’s profit after a sale. This was suggested by a customer who typically likes to inform investors what profit they might expect after they sell the property. This was done by deducting the investor’s initial investment plus upgrades from sale proceeds.

3. The operating expense computation in the rent scenarios form and report was modified to change how operating expenses are shown. THIS IS THE SAME AS THE UPDATE FOR EXECUTIVE 10.0 (Executive 10.0, item 1, above).

Recent Other 6.0 Updates:

4. The ability to select between USA mortgage amortization (our default setting) and Canadian mortgage amortization. This was suggested by a customer in Canada.

HOW DO YOU GET THE UPDATE?

IT’S EASY. Just login to your account and look for the Download button under “Updates”.

THANK YOU ALL for your suggestions and patronage. AS ALWAYS, please feel free to send me your suggestions and, of course, to notify me immediately if you encounter any issues.

Regards,
James R Kobzeff
ProAPOD
503-949-9034

ProAPOD Real Estate Agent Software 6.0 has been updated

ProAPOD Real Estate Agent Software 6.0 has been updated and is ready for downloading. If you are currently using this real estate investment software solution, simply login to your account and click the download button under “Updates”.

Here is what we added.

  1. An entry for property upgrades. This allows you to include an amount for upgrade costs (i.e., painting, carpeting, roofing, and so on) in addition to the property’s operating expenses.  This allows you show any one-time cost separate from ongoing costs required to run the property and is revealed in the APOD, Rent Scenarios, and Proforma Income Statement.
  2. A line item in the proforma income statement that shows the investor’s profit after a sale. This was suggested by a customer who typically likes to inform his investors what profit they might expect after they sell the property. This was done by deducting the investor’s initial investment plus upgrades from sale proceeds.
  3. The operating expense computation in the rent scenarios form and report was modified to change how operating expenses are shown. This was also a suggestion made by a customer. Rather than simply computing operating expenses in the Rent Scenarios as a percentage of GSI, the program carries-forward the actual dollar amounts entered in the Expense form and changes only those entered as a percentage of GSI in the Expense form. This allows you to see a truer result when rents are increased.

Although every effort has been made to insure the integrity of these revisions to our real estate software, please notify me immediately if you encounter any issues as a result of these revisions.

You Must Know This Before Investing in Real Estate

Sound too good to be true? It isn’t it. The concept and recipe for success in real estate investing is very easy to understand, but very difficult to do. Forget everything you have heard from the "gurus", and the promise of making sweet deal after deal with no money down that is going to pay you thousands and thousands of dollars. These late night infomercials are only after one thing – sell you their system. The one thing that you absolutely have to know and care in real estate investing is this:

BUY RIGHT!

My first real estate deal involved 2 wrong choices:

* Terrible partner
* Bought the real estate very near market value

This article is not about choosing the right partner, it’s about buying right. Most "good deals" that brokers, agents and websites that list houses for sale ARE NOT good deals. They are simply a ploy to get you interested in the property and rely on that old sales tactic – emotion. You fall in love with the house, and you pay the price. Real Estate agents are masters at this.

So what does it mean to buy right? Usually buying right means buying at 60-75% of market value or lower. How do I find out what the market value is? Start with checking the tax rolls for the house you are interested in, many of them are available online. If you are unable to find one online, check with your realtor. Second, have your realtor run a CMA (Comparative Market Analysis) as this is the best indicator of market value. It will reveal other similar houses in the area and what they have sold for. Have the realtor run the analysis for the last 6 months, as newer sold listings are better indicators of current market value.

Look for houses that are distressed, meaning foreclosure, owner in trouble, etc. I have had success investing in HUD houses, and current listings can be found on HUD’s foreclosure site. Submit your offer. Start a little lower than the 60-75% percent so you can negotiate up (for HUD, you can resubmit a higher offer later if it gets rejected). Don’t worry about it being rejected, this is going to happen most of the time! Be patient, submit many offers until someone is willing to negotiate.

Trust me, if you don’t follow this information, you going to end up paying too much for the real estate property, and then you are going to be in the same position I was, too much money tied up in the deal, and unable to sell at a price that will make any money. I ended up losing ,000 on my first deal. Talk about the school of hard knocks!

Get more great finance and investing tips at Jeffry Evans’ personal finance blog. Real Estate Investing 101 is just one of many great articles you will find at Personal Finance Resources.

Article Source: ArticleSpan

Understanding the Three Types of Financial Leverage

Financial leverage is a term associated with financing that refers to the use of borrowed funds to acquire investment property. When compared to the value of the property, the amount of leverage increases as the amount of borrowed funds increases, and conversely, decreases when the amount of borrowed funds decreases.

For example, a real estate investor who borrows $80,000 to acquire a rental property valued at $100,000 would be getting a higher financial leverage than an investor who borrowed a lesser amount (say only $70,000) to purchase a rental property valued at $100,000.

Of course higher leverage isn’t necessarily better for the investor than lower leverage, and vice versa. Because leverage has a direct impact on the investor’s yield, the investor must consider how the cost of borrowed funds (i.e., the interest rate) differs from the rate of return on the property that would occur without financing.

In other words, depending on whether the investor might expect to receive a higher or lesser yield when borrowing funds to purchase an investment property compared to paying all cash, the investor is confronted with three types of leverage that could occur during the acquisition of investment real estate.

1) Positive leverage

Positive leverage occurs when borrowed funds are invested at a rate of return that is higher than the cost of these funds to the equity investor. In other words, positive leverage is simply putting money to work to earn more than the money costs to borrow.

The result of positive leverage is an increased yield to the equity investor over the amount that would have occurred without borrowing. The investor benefits both from the investment’s yield on equity and from the difference between the cost of funds and the earnings on those borrowed funds for each dollar borrowed. Therefore, in this case, an investor can be making money on every dollar borrowed.

2) Neutral leverage

Neutral leverage refers to an investment situation where the cost of funds to the investor is exactly equal to the yield of the investment into which they are invested. In this situation, the borrowed funds have no effect on the yield to the equity investor, nor does it change with the amount borrowed for investment.

3) Negative leverage

Negative leverage occurs when borrowed funds are invested at a rate of return that is lower than the cost of those funds to the investor. The result of negative leverage is a decreased yield to the investor over the amount that would have occurred without borrowing. Therefore, in this case, with negative leverage, the investor is losing money (return) on each dollar borrowed.

How and Why Real Estate Investors Make Cash Flow Projections

The success or failure of a real estate investment ultimately depends on the property’s ability to produce revenue. Therefore real estate investors are always interested in making cash flow projections on any investment property they are evaluating as a potential investment.

Okay, but let’s start at the top.

Rental properties are subject to a flow of funds whereby money comes in and money goes out. When more money comes in from the property than goes out the result is a “positive cash flow” that benefits the investor. Likewise when more money goes out than comes in the result is a “negative cash flow” that regrettably means the investor must “feed the property” with personal cash to make up the deficiency.

Understandably then, prudent real estate investors seek to know whether the property will produce enough cash to pay its bills over time. Even if the investor decides that the investment is worthwhile enough despite its negative flows (because they are brought front and center during the evaluation) they can be anticipated and therefore are less likely to blindside the investor later after the purchase.

The two reports investors commonly rely upon in their rental property analysis for cash flow projections are the APOD and Proforma Income Statement. Let’s consider the strengths and weaknesses of both.

The APOD

An APOD (annual property operating data) is a mini income statement that is helpful to real estate investors because in a concise manner it reveals the income, expenses, and cash flow for the first year of ownership and therein acts as sort of a “first-glance-look” at the property’s financial condition for the investor.

The shortcoming of the APOD lays in the fact that it does, however, only project the cash flow for the first year of ownership and it does not account for tax shelter. As a result, you should only look at an APOD to provide you with a “snapshot” of the property’s cash flow and returns in order to help you to make an initial decision whether or not to look further into an investment opportunity. But don’t rely upon an APOD too heavily.

The Proforma Income Statement

A Proforma income statement, on the other hand, is a more robust way to project cash flows because it anticipates a property’s financial condition beyond the first year of ownership (commonly extended out over a period of ten years) and does account for tax shelter (at least those created by the better real estate investment software solutions).

The benefit of being able to make revenue projections over a number of years is self-explanatory. Whereas the fact that a pro forma considers cash after taxes is important to investors because they can anticipate what may or may not be left over after income taxes are paid on the property’s earnings.

The shortcoming, not unlike any projection, is that the numbers revealed in a Proforma income statement are projections subject to a lot of variables that can easily be skewed.

The Bottom Line

You should not depend on either an APOD or a Proforma Income Statement to provide you with enough information to make a sound investment; there is much more for you to consider. Nonetheless, for real estate investing purposes, these reports can provide you with cash flow projections you must consider before you make any real estate investment rental property so you don’t find yourself facing negative cash flows you didn’t anticipate (a prospect no real estate investor relishes).

Real Estate Investing Can Profit or Lose You Money: You Choose!

There is no such thing as a “no-brainer” in real estate investing; it’s all about the numbers. And when you understand what real estate investing is and are serious enough to do it by the numbers (not by the seat of your pants) then investing in real estate can pay you big dividends; otherwise you lose money or would have to consider yourself lucky.

Sure, there are a few that dodged the proverbial bullet and can claim that they have made money on income property without sweating all the numbers, but they are in a league of their own. Like a lottery winner, they were simply lucky.

Here’s the reality. At the end of any investment day real estate investing generally results in one of three possible outcomes: (1) It can make you money, (2) it can cost you money, or (3) it can make you less money than it might have made you otherwise. Moreover, it’s your actions that are more prone to decide the outcome, not the alignment of Jupiter with Mars. Its best, therefore, to consider the right way to invest in real estate and not simply to throw caution to the wind with your fingers crossed. Enough said.

So from this point on we’ll assume that you aren’t a gambler at heart, that you don’t expect to win the lottery, and that you want to learn by the numbers what it takes to succeed at real estate investing. Okay, but you must remember that it’s all about the numbers.

Foremost, you must learn how (and have the ability) to determine a property’s cash flow, rates of return, value, and a handful of other key measures so you can read the property’s vital signs and judge its health to the degree that you can accurately decide whether it’s an investment suited enough for you to invest your money.

The old adage is true: You make your money when you purchase, not when you sell. This means that you must only purchase investment real estate that promises a profit because the numbers (crunched more than once) say so. If the numbers don’t add up, regardless of how good the price looks or how enchanted you are with the property, don’t buy; or at least protect your wallet until you dig a lot deeper.

Okay, but it doesn’t stop there.

When you run the numbers on properties you already own you can add a substantial degree of control over the outcome of your investment results and vastly improve your chances of keeping your net worth intact. For example, being able to run and make clear presentations of your property’s net operating income and cap rate can help you argue a property tax assessment if a dispute arises, maybe obtain better financing during a refinance, win over an investment partner, or justify a sale price when you decide to sell.

You get the idea. Whether you’re buying or selling rental property, or just trying to decide what to do with property you already own, the numbers tell the story, so it makes sense that when you can run, evaluate, and present those numbers correctly you are more apt to maximize the potential of making or saving thousands of dollars on every perspective real estate investing opportunity you choose to consider.