Need a Stocking Stuffer? How About My iCalculator!

iCalculator is an online real estate calculator I developed that functions as a calculator, but also displays the definitions and formulas to many of the real estate investing computations.

So users not only have the advantage of making dozens of real estate calculations, but they also get the benefit of learning many of the formulas associated with real estate investing.

Learn more about iCalculator and preview screenshots…

Benefits

  • 24/7 Mobile Online Access – iCalculator is 100% web-based. There’s nothing to download and it can be accessed from any device that has a web connection.
    • PC
    • Mac
    • iPad
  • Easy to Access. Easy to Use.
    • Login from the ProAPOD website and instantly be taken to iCalculator
    • Select the calculation, fill in the form, hit Calculate. Viola! The results and formulas appear
  • One-time Payment. No Update Charges.
    • NO subscription fees and NO update fees
    • One time payment of $24.95 (64% discount off retail price)

Try It Yourself Risk-free!

Want to try iCalculator yourself first? No problem.

  • Buy it at and try it at real estate calculator gifting for $24.95
  • Let me know within five days if its not for you and I’ll refund your money in full with no questions asked.
  • Naturally, the money-back guarantee applies to your first purchase only. It will not apply to multiple purchases you may make afterward so your friends and family can’t refund it. (Hey, I’m just being fair).

Want to Make Multiple Purchases?

Sure you can. If you decide to gift iCalculator to several friends or family you certainly can do so. Just give me a call at 505-949-9034 for instructions.

More About iCalculator

You can learn more about this unique online real estate calculator solution by going to online real estate calculator for Christmas...
 

1

Real Estate Investing Starter’s Guide

rreal estate investing starterThe “get-rich-quick” methods of real estate investing are something I generally oppose because they often assume self-management and typically ignore your opportunity cost of time and the risks of high leverage. Besides, what reasonable thinking person would believe that someone who in fact has the “map” to a buried treasure would be so apt to share it?

In truth, there is no sure-fire way to achieve real estate investing success apart from hard work, plenty of good research, and a concise, systematic and thorough real estate analysis. Fair enough.

Okay, so in this article I want to provide you with a real estate investing overview to acquaint you with some things worth considering about real estate investment that will get you started on the right foot.

1) Opportunities to Make Money

Real estate investing can become a profitable business because there are various ways for you to add value to real estate investment property.

  • Real estate acquisition – buying at a price that leaves you with “upside” potential to add profit.
  • Upgrades – adding value by improvements or renovation.
  • Financing – borrowing money at a highly favorable rate and terms.
  • Site analysis – buying in a location where growth trends or changes in zoning will have a positive impact on the property.
  • Controlling operating costs – reducing potential cash outflows and thereby increasing potential cash inflows.
  • Innovative property management – increasing the amount of rent and reducing the vacancy factor.

2) Business Goals

Consider your personal business investment goals. What is it that you want to achieve by real estate investing?

  • Maximize long term wealth.
  • Short term financial goals like cash flow.
  • Develop or own only the highest quality properties in prestige locations.
  • Own the largest market share of a certain type of income property in a local market.

3) Short-term Goals

Consider what you hope to achieve financially in the short term by investing in the rental property. For instance,

  • Satisfy the requirements of the lender in terms of pre-leasing or debt coverage cash flows.
  • Satisfy the minimum required first year cash on cash returns required of investors.
  • Project minimum internal rates of return for the entire holding period of some minimum percentage.
  • Maintain occupancy levels above 95% in all portfolio properties.

4) Investment Value Approach

Consider which approach will ultimately determine property investment value. Different from market value – which is derived from investment decisions of other investors in the market – this signifies what would attract your capital to the property. For instance,

  • The exploitation of market niches such as tax foreclosures, fixer-uppers and so on.
  • Stabilized income and expenses at a given point in time without adjusting for changes that might occur in the future.
  • Market-orientated information such as sales comparison, replacement cost, or the present value of anticipated future net income streams.
  • Some assumptions about income and expenses over time, tax shelter, appreciation or depreciation rates, reversion (property value at the end of the holding period) and so on.

5) Performance Gauge

Consider which returns and measures you will use to gauge the property’s financial performance and tend to base your real estate investment decision. For instance,

  • Capitalization Rate – a popular return on asset indicator of how much debt an income property can carry.
  • Cash on Cash Return – measures the initial profitability of a rental property.
  • Internal Rate of Return – delivers in one number an investment return that integrates rental growth rates and property value appreciation and used as a comparison to the real estate investor’s required rate of return for making capital allocation and initial investment decisions.

6) Number Crunching

Consider how you will crunch the financial data in order to determine the rental property’s cash flows, rates of return and profitability.

  • Manually with an Excel spreadsheet.
  • Investment in a real estate investing software solution.
  • Rely on real estate analysis reports presented by others.

iCalculator: The Adjusted Basis Tax Calculation

adjusted basis calculation

Adjusted basis represents the net cost of (in our case) a rental income property adjusted for certain federal income tax related items; in other words, it refers to the increase or decrease in the property’s value due to depreciation and or capital enhancements.

It is a crucial component when calculating capital gains and losses for income tax purposes on an outright sale of a rental property since the adjusted basis is higher than the original price and will lower capital gains taxes.

In this article we’ll look at this income tax cost basis and show you how it’s computed on a rental income property sale.

Adjusted Basis

Represents the beginning basis of the property (depreciable basis plus land value) plus value of capitalized items less accumulated depreciation taken under depreciation guidelines during the holding period.

Capitalized items are those costs incurred over the holding period that extended the life of the investment and therefore were subject to depreciation.

Formulation

Purchase price
+ Costs of acquisition
= Original basis
+ Capital additions
– Depreciation taken
= Adjusted Basis

Example

Let’s say that you purchased a 25-unit apartment complex several years ago for $1,125,000 and incurred $27,000 in acquisition costs. Since then you have made $50,000 in capital improvements to the property and have taken $95,475 in accumulated depreciation. You want to know what your current adjusted basis is in order to plug it in for your taxable gain computation.

$1,125,000
+ 27,000
= 1,152,000
+ 50,000
– 95,475
= 1,106,525

Illustration

Let me show you how easily you can determine your adjusted basis using iCalculator (click image to enlarge).

adjusted basis calculation


Source: iCalculator by ProAPOD

So You Know

iCalculator makes dozens of real estate calculations with the formulas. You can try it risk-free and save 50% (you pay just $24.95). Click here to learn more and get the discount.

iCalculator Inflation Rate Calculation Updated

iCalculator has been updated to include the latest US government CPI data released on November 16, 2012.

This update will now enable you to calculate the annual inflation rate on any years from 1913 through November 16, 2012. The previous table included CPI data through October 16, 2012.

How to Access

To access the Inflation Rate calculator and make a calculation simply do the following:

  1. Login to iCalculator from the ProAPOD website
  2. From the calculator’s top menu click Time Value
  3. In the left menu click Inflation Rate
Illustration
annual-inflation-rate


Source: iCalculator by ProAPOD

  1. In the form enter a Start year, Dollar amount spent, and Ending year
  2. Click Calculate
Illustration
icalculator-inflation-1


Source: iCalculator by ProAPOD

Update is Free

This update – as well as are all updates to this real estate calculator – is totally FREE. If you are a current user of iCalculator, simply login and start using it to figure your own inflation rates.

So You Know

In addition to inflation rate, iCalculator provides a host of real estate calculations along with displaying the definitions and formulas for dozens of real estate investing returns. To learn more about this unique online solution go to online real estate calculator.

 

Does Your Real Estate Analysis Include a Rent Scenarios Report?

rent scenariosDoing a real estate analysis on rental properties prior to making investment decisions is crucial to real estate investors seeking to earn maximum profit and rates of return.

A real estate analysis is essentially a study of a rent property’s financial and other data to determine whether or not it is a suitable investment for a given investor.

Of course, this would involve a full range of considerations such as location, condition, unit configuration, comparative market value, financing, and so on.

But at the end of the day, the investor is really most interested in how all of those issues effect cash flow. For unlike residential home buyers, real estate investors are running an investment business that succeeds or fails by the amount of profit he or she can achieve by owning the property.

So it’s safe to say that the true bottom line of any real estate analysis concerns the property’s present and future cash flow performance; namely, rents.  Rental income, of course, is what drives cash flows; so the investor will always consider rents in a real estate analysis.

In this article I want to show you a helpful way investors can study rents during the real estate analysis process using a rent scenarios report based upon the scenario analysis model.

Scenario Analysis

Scenario analysis involves evaluating a range of variables likely to impact investment performance and then assigning a discrete (point) estimate to create a most likely, best-case, and worst-case scenario for each in order to see how each estimate for the variable might likely influence investment performance.

In our case, the investor would be conducting a rent scenario analysis as part of his or her real estate analysis. Therefore he or she would assign an estimate to each of the current rent variables that best reflects a most likely, best-case, and worst case scenario to thereby evaluate the impact each would have on cash flows and rates of return.

Example

Let’s say the investor is considering  purchasing a 100-unit apartment building consisting of three different unit configurations (or unit mix).

  • Twenty five one-bedroom one-bath units renting monthly at an average of $515
  • Sixty two-bedroom one-bath units at an average of $560
  • Fifteen three-bedroom one bath units at of average $615

The investor in turn assigns three average monthly rent estimates (shown below) to each of the three unit configurations ranging from what he or she deems that the rental income can be “in a heart beat” (Scenario1) to “yes, I won the lottery” (Scenario3).

Illustration
rent scenarios form


Source: ProAPOD Real Estate Investment Software

As a result, the investor can now see that the property could at the very least generate an annual cash flow of $157,213 (low risk), perhaps $168,613 (moderate risk), and $180,013 (high risk).

You get the idea.

The objective of the investor is to decide whether his or her real estate investing objective is met by the “upside potential” reflected in the rent scenario analysis. The report is printed and included as part of the overall real estate analysis for the eventual investment decision.

Report
rent scenarios report


Source: ProAPOD Real Estate Investment Software

Applications

The Rent Scenarios Report provides investors with the property’s “upside potential”. In some cases it may prove dismal enough for the investor to pass on the rental property. In other cases it could indicate a very solid investment opportunity and keep an investor who otherwise might have walked away to instead make a purchase on a rental property with enormous income potential.

The Rent Scenarios Report can also help educate sellers about his or her rental property’s “realistic” income potential and thereby prevent over pricing it based upon “pie-in-the-sky” rental income projections that neither support or justify the price.

So You Know

ProAPOD Real Estate Investment Software solutions Agent 6 and Executive 10 both include the Rent Scenarios Report.

1

Real Estate Valuation – How to Use the Income Approach to Value

The ability to quickly arrive at a real estate valuation for commercial or residential income properties is an essential advantage for any real estate investor, broker or analyst. After all, there are times when we might not have access to our computers and real estate investment software, or might just want to remind ourselves that we can still do the math on a napkin over lunch.

Whatever the case, anyone engaged in real estate investing who has worked with residential income or commercial properties has at one time or another required a ballpark estimate of real estate valuation made on the fly.

In this article, I’m going to show you how you can do that using the income approach to value method. It does require some data insight, but otherwise provides a quick and straightforward way to arrive at estimated investment property values.

For this illustration, we’ll assume that you just came across a rental property listed for sale and want to see whether you think that the asking price is inline with your property value estimate.

Income Approach to Value

This approach requires a net operating income and capitalization rate, so to make the calculation you will have to make a couple of determinations beforehand.

  • The property’s net operating income
  • The capitalization rate you want to apply

Net Operating Income
First, determine the property’s net operating income (or NOI). You might find this posted on the property’s listing page or other materials such as a marketing package; if not, contact the listing agent directly and ask for it. Or, if you’re acquainted with the property and know its net operating income, fair enough.

In any case, you must start with a somewhat realistic net operating income.

Capitalization Rate
Secondly, determine the capitalization rate (or cap rate) you prefer to use in the computation. In this case, you must decide whether to define the cap rate by the investor’s investment value or a market value using market derived data. Here’s the distinction.

  • Investment value to an investor is the present worth of future benefits that will provide a specified target rate of return at the level of risk that is acceptable to the investor – the real estate investor will define the capitalization rate you use.
  • Market value involves typical or average cap rates based upon the recent sales of similar-type properties in the area – the local market will define the cap rate you use.

In other words, if you know that your investor will not purchase any investment property with less than a 8.0% yield, than use that figure in the calculation. On the other hand, if he or she is willing to consider properties inline with the average cap rate for market value (say it’s 7.0%), than use that figure for your real estate valuation computation.

Formulation

Net Operating Income divided by Cap Rate = Real Estate Value

Example

Let’s say an apartment building just came on the market listed for $600,000 and you want to do a rough income to value estimate to see whether you should forgo lunch and call your investor.

You learn that the net operating income is $31,140, and from your experience with the investor you know that nothing less than a 6.23% return is desired. How do you solve for real estate valuation? You apply your investor’s desired rate of return to the cap rate in the computation.

Net Operating Income divided by Cap Rate = Real Estate Value
$31,140 divided by 6.23% = $500,000

Result

Your real estate valuation approach indicates that the rental property’s listing price of $600,000 is $100,000 more than your investor has indicated he or she may be willing to pay.

Perhaps you call for the marketing package anyway, or recalculate the numbers on your computer. The point is – at least from your primary real estate valuation calculations – that you do not need to interrupt your lunch with an urgent call to your customer.

So You Know

ProAPOD Real Estate Investment Software does include a feature called Price Analyzer that automatically calculates real estate valuation based upon the income approach to value. You can preview at real estate investing software features by scrolling down to Price Analyzer and clicking Learn More.