Free Online Calculators

You are all invited to visit and use my FREE online calculators.  Calculations currently exist for cap rate, gross rent multiplier, debt coverage ratio, mortgage payment (PI), and mortgage payment (PITI). The calculators are easy to use and include the formulas for the real estate returns as well as an amortization table for the mortgages.

Here’s a summary.

  1. Cap Rate – Requires just two entries for sale price and net operating income. The calculation is instant and includes the formula.
  2. Gross Rent Multiplier (GRM) – Requires just two entries for sale price and gross scheduled income. The calculation is instant and includes the formula.
  3. Debt Coverage Ratio (DCR) – Requires just two entries for net operating income and annual loan payment. The calculation is instant and includes the formula.
  4. Mortgage Payment (PI) – Requires three entries for loan amount, interest rate, and term of loan. The result is the monthly principal and interest payment and includes an amortization schedule.
  5. Mortgage Payment (PITI) – Requires five entries for loan amount, interest rate, term of loan, annual property taxes and insurance. The result is the monthly principal, interest, taxes, and insurance payment.

It is 100% FREE, and there are no strings attached. You are not required to submit any information and there is no obligation. So please take advantage of these free online calculations and start putting them to good use.

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About Cap Rate and Cash on Cash Return

cap rate or cash on cash Cap rate (or capitalization rate) and cash on cash return (CoC) are certainly two of the more popular and commonly used measures real estate investors look for to determine rental property profitability.

Most real estate evaluations contain them, and in fact it would be rare for a real estate analysis not to include them, nor for real estate investors not to consider them.

In this article, we will provide a brief overview of both returns for those of you new to real estate investing in order to give you an idea of what they are and how they apply to the investment process.

Cap Rate

Capitalization rate is a return that measures the ratio between a property’s net operating income and its sale price (or value).

Application

Cap rates are mostly used to determine whether or not a property’s value is in-line with other similar rental properties in the general market area.

For example, if an apartment building is listed at $600,000 and generates a net operating income of $47,880 we can safely assume that the property is listed at a 7.98% cap rate merely by dividing the net operating income by the sale value.

Net Operating Income / Sale Price = Capitalization Rate
$47,880 / 600,000 = 7.98%

Okay, now we can determine whether it is listed at a fair market value by comparing it to the capitalization rates other similar rental properties recently sold for in the area.

Step one. Divide each sold property’s net operating income by its sale price and then compute an average for those cap rates.

Step two. Compare that average to that for the subject property.

For instance. In our example we concluded that our subject rental property has a capitalization rate of 7.98%. If the average capitalization rate in our local market is higher than that, we can conclude that our property appears to be priced higher than fair market value, and perhaps over-priced; and if lower, that our property is priced in line with market values, and perhaps under-priced.

Cash on Cash Return

The cash-on-cash return (or COC as it’s labeled in many real estate analysis reports) measures the ratio between the annual cash flow generated by the property and the cash required to make the investment.

Application

Cash-on-cash mostly is used for the investor to determine the return that will be earned on the initial investment he or she is required to make for the purchase. So this is about the investor’s cash outlay and the property’s cash flow, and is irrespective of value.

For example, if a buyer must invest $94,400 cash to purchase an apartment building generating an annual cash flow of $11,934, CoC will tell the investor that he or she will earn a rate of return of 12.64% on the initial cash investment for that year.

Cash Flow / Initial Cash Investment = Cash on Cash Return
$11,934 / 94,400 = 12.64%

Rule of Thumb

Naturally, real estate investors would not rely upon any single return to tell the whole story about an income property’s financial performance. Nor would they look to any single return alone to make a real estate investment decision.

Nonetheless, both capitalization rate and cash on cash rate of return do provide investors with an upfront idea about the property, and in turn suggest whether or not it’s worth pursuing as a real estate investment.

 

Real Estate Investor: Software Updated

 

ProAPOD’s real estate investor software solution Investor 4 has been updated. If you are currently using ProAPOD Investor 4 simply login to your account and grab the update.

Here is a summary of the changes that have been made to this software solution that now make it easier than ever for you novice investors to know whether an investment property will be profitable before you invest their money in a property.

1. More real-time calculations – Both the forms and “Learning Center” have been revised to show more real-time calculations. This gives you even more information about the property’s financial results as you fill-in the forms; so now you can track the property numbers in real-time from form-to-form even better than before.

2. More cash-flow projection flexibility – This update will now enable you to “step” the property’s rental income, other income, and operating expenses by the year you select. The previous version automatically computed any percentage growth you entered starting in the second year only. The property resale method has also been modified to include both an annual inflation rate and specified price (by the year you select). The previous version computed an annual inflation rate starting in the second year only.

3. Improved Assumptions report – The Assumptions report is an important part of a real estate analysis because it presents details about the property’s proposed income, operating expenses, financing, and capital improvements in an easy-to-read format. This report has been improved to show more data and detail surrounding all four such as second and third loans, itemized other income, and expenditures for first-year upgrades.

4. Modified replacement reserves – Reserves for replacement represent money set aside for an estimated future capital improvement. Rather than deduct it from operating expenses (which in turn would lower net operating income and thereby affect capitalization rate) we felt it better to deduct it from net operating income.  The overall affect of this modification is slight but we felt it would compute a truer reflection of the property’s profitability and rates of return.

To obtain this update, simply login to your customer account from ProAPOD and clicking the button under “UPDATES” than following the online instructions.

If your purchase of this solution was made more than twelve months ago you might be required to renew your membership. In this case, simply click Renew Membership, pay the $79.95, and than log back in to grab the update. Bear in mind, that your membership subscription not only entitles you to download this update, it also entitles you to free updates for one additional year.

 

 

Real Estate Calculator Updated

ProAPOD’s Real Estate Calculator has been updated to include the inflation rate for April 2012 by the latest US government CPI data released on April 13, 2012. In other words, you can now measure the buying buying power of a dollar from 1913 through April 2012.

For example, are you aware that a $10.00 expenditure made in 1913 would now require an expenditure of $231.71 in April 2012 for exactly the same product or service? Or that the inflation rate has increased 178.4% since 1980, 33.2% since 2000, or 6.5% since 2008?

As a current user of our online real estate calculator you are obligated to PAY NOTHING for this update. Simply login to your account at http://www.proapod.com and start calculating.