Inflation Rate Calculator, Update 7-28-13

iCalculatorThe inflation rate calculator provided in ProAPOD’s iCalculator online real estate calculator solution has been updated in accordance with the latest US government CPI data released June, 2013.

As a result, iCalculator users can now use the inflation rate calculator to compute annual inflation rates from 1913 through June, 2013.

I ran a few inflation rate computations following this latest update just to give you the idea.

  • You will discover that $20 spent for goods and services in 1913 will now require $471.73 in today’s dollars for the same goods and services (an annual inflation rate of 2258.6%).
  • $300 spent in 1977 will require $1,155.96 (an annual inflation rate of 285.3%).
  • $30,000 spent in 1992 will require $49,929.58 (an annual inflation rate of 66.4%).

Of course you can choose any amount between any years (1913 to 2013) you want for the inflate rate results. The inflation rate calculator only requires you to provide your three desired entries.

Update is Free

This update is absolutely free to current users of iCalculator. So the next time you login and start calculating the current inflation rates will be computed.

So You Know

iCalculator includes dozens of calculators that enable you to make calculations PLUS learn the formulas. Learn more and SAVE 50% by clicking learn more about iCalculator and save 50%.

Commercial Real Estate Square Footage

Real estate investors will typically rent out commercial space by the square foot. So the measurement of commercial space is, of course, important to investors.

But unlike the calculations one would typically make to derive the square footage for most other types of investment real estate, determining commercial real estate square footage requires more than a tape measurement.

In fact, there are different kinds of square-foot measurements in commercial leasing that real estate investors should understand.

With commercial rental property it essentially revolves around two areas. The gross area (the total floor space of the building), and the net rental area (the gross area less the nonrentable areas like corridors and stairwells).

In this article, I want to acquaint you how commercial real estate square footage typically evolves as an outcome of four components that concern these two areas and ultimately derive commercial space rent.

Please note, however, that my purpose is merely to acquaint you with a general overview of the commercial real estate square footage process, and is not intended to be a detailed examination.

1. Gross Building Area

This is straightforward because it is measured with a tape measure. It is the total floor area of the building from the outer surface of exterior walls and windows, including elevator shafts, utility rooms, and basement space.

For example, the outside measurements of a building 100 ft by 100 ft results in a gross floor area of 10,000 sq ft. If the building has two stories of identical floor size, then the building has a total gross building area of 20,000 sq ft. (10,000 x 2).

2.Common Area

This is space contained in the building the owner provides that a tenant does not directly occupy but would not be able to generate a revenue without. This typically includes such things as a lobby, corridors, rest rooms, utility rooms, elevator shaft, etc.

3.Usable Square Footage

This is the space contained in the tenant’s (or all tenants’) premises. We will not get into the technical terminology like “demising walls” (i.e.,the walls that separate one tenant from another) and make it simple. Usable square footage is the actual physical space a tenant occupies (even when every square foot is not truly usable to the tenant).

For example, a building with a total gross area of 20,000 that contains 4,000 sq ft. of common area results in a usable square footage of 16,000 sq ft. (20,000 less 4,000).

4.Rentable Square Footage

This is whatever square footage the landlord and tenant ultimately agree upon for the lease. So there is no universal standard for calculating rentable square feet. In many cases, however, this is generally the combination of the useable space along with a percentage of the common area.

For example, a tenant may be required to pay rent on his or her usable square footage of say 1,600 sq ft., along with (say) a 10% allocation of the common area (an additional 400 sq ft.). In this case, then, the tenant’s rent would be based upon 2,000 rental square feet.

Bottom Line

Commercial real estate square footage is an important consideration that affects how real estate investors rent out their commercial spaces. So it requires far more serious attention then presented here. But hopefully you get the idea.

A commercial building has an overall size. Tenants occupy and use most of that space, and what remains are common areas that cannot be rented. As a result, the owner will generally base the tenant’s rent on both his or her usable place plus a portion of the space common to everyone.

Here’s to your real estate investing success.

Rental Property Investment Performance Indicators

Successful rental property investment requires real estate investors to strictly gauge the financial performance of all potential rental property investment opportunities.

As a result, a number of useful ratios, multipliers, and other analytical measures have been developed as “indicators” the investor can use to determine specific levels of a property’s anticipated cash flows and profitability.

These ratios and measures are part of the real estate analysis, and are commonly displayed in reports such as an APOD and Pro Forma Income Statement.

In this article we’ll consider four of those indicators (with formulas). It should be noted, however, that the results of these calculations are only useful if they can be compared to similar information gleaned from comparable properties in the local market area.

1. Economic Value

This is a measure of value from the real estate investor’s standpoint, and may be more or less the market value of the property (though not necessarily). It is determined by the investment property’s net operating income and a capitalization rate that the investor requires to attract his or her capital to the project.

In other words, regardless what value has been placed upon the rental property by the market, the “true” value to the investor (in this case) is what he or she deems will appropriately satisfy their investment objectives.

Formula

Net Operating Income (specific property)
divided by Capitalization Rate (individual investor)
equals Economic Value

Example

Let’s say a property generates a net operating income of $461,867 and the investor’s desired cap rate is 10.8%. In this case, the economic value (what the rental property investment is worth to the investor) would be $4,276,546.

$461,867
/ .108
= $4,276,546

If this economic value is equal to or greater than the subject property’s fair market value, then the investment property could prove worth pursuing; otherwise, maybe not.

2. Operating Expense Ratio

This ratio provides an indication of what percentage of the gross operating income is being consumed by operating expenses.

The investor’s purpose here is to compare the subject investment property’s operating expense ratio against that computed for other similar properties and then to reconcile substantial differences.

Anything other than the norm, for instance, could be an indication that the subject property’s operating expenses are somehow unique, or perhaps that they may not have all been correctly ascertained. In other words, why such a difference?

Formula

Operating Expenses
divided by Gross Operating Income
equals Operating Expense Ratio

Example

Let’s say the subject property’s operating expenses are $251,998 and its gross operating income (rental income minus vacancy credit and loss) is 713,865. In this case, the operating expense ratio for the rental property investment is 35.30%.

$251,998
/ 713,865
= 35.30%

Naturally, this is just one small element about the subject rental property investment. But a substantial difference in ratios when compared to similar other rental property should raise a red flag that requires a closer look.

3. Break-even Ratio (BER)

This ratio (also called default ratio) is the percentage rate of gross operating income that is consumed by operating expenses and debt service combined.

Its purpose is to estimate how vulnerable an income property is to defaulting on its debt in cases where rental income should decline. This is often a benchmark ratio used by lenders when underwriting commercial mortgages as well.

Formula

Operating Expenses + Debt Service
divided by Gross Operating Income
equals Break-even Ratio

Example

Okay, we already know (from the previous examples) that our subject rental property investment has a gross operating income of $713,865 and annual operating expenses of $251,998. Now let’s say that the debt service would be $255,354. The result would be a break-even ratio of 71.07%.

$251,998 + 255,354
= $507,352
/ 713,865
= 71.07%

These means that the money going out to service the property is 71.07% of the income it generates. Lenders typically look for 85% or less, so this property fairs well in this case.

4. Debt Coverage Ratio (DCR)

This ratio provides information on the extent to which the net operating income covers debt service. The objective for the investor here is to insure that the property can pay for itself without having to “feed it” out-of-pocket.

Formula

Net Operating Income
divided by Debt Service
equals Debt Coverage Ratio

Example

Okay, by dividing the property’s net operating income of $461,867 by the debt service of 255,354, the result is a debt coverage ratio of 1.81.

$461,867
/ 255,354
= 1.81

A ratio of 1.0 indicates enough net income to make the mortgage payment, and lenders typically like to see 1.15 or greater (i.e., 15% more income than the payment). So, either way, this rental property investment appears to produce ample income to cover the mortgage payment.

Illustration (click image to enlarge)

apod

So You Know

ProAPOD provides three rental property investment software solutions that each automatically compute these performance indicators and post to the appropriate reports.

 

Need a Profit and ROI for Your Fix and Flip?

fix and flipThose of you engaged in REOs and other investment real estate you plan to fix and flip immediately sometimes may just want a quick look at your potential profit and return on investment (ROI).

In other words, short of making a serious investment decision, you just want to make a quick determination as to whether the property is even worth seriously pursuing.

This is regularly the case when investing in these types of real estate properties because it is certainly true that not every fixer-upper is worth the time and effort an investor cares to spend digging further.

Fair enough.

Okay, so let me tell you about a unique online real estate calculator I developed called iCalculator that should be of interest to you. For amongst the many other calculations that it makes in seconds, it also includes a calculator for fix and flip property investors.

The process is extremely easy. You simply fill in the user-friendly form and click Calculate. Then instantly you are shown the results for both your anticipated profit and return on investment.

Example

Let’s say you can buy an REO for $125,000 all-cash with closing costs of $1,150. Property taxes are $3,500 and insurance is $1,800 annually. Utilities should run $80 monthly and you will include $3,000 for other costs. You want to budget $25,000 for rehab costs. You believe the property can be turned around for $220,000 and expect to pay 5% of the price for closing costs. You want an idea of your profit and return on investment if your holding period is six months.

Step 1: Fill in the form.

The following illustration is a screen shot taken directly from iCalculator. Click the image to enlarge.

return on investment calculation

Step 2: Click Calculate.
Step 3: Read the results.

The following illustration is a screen shot taken directly from iCalculator. Click the image to enlarge.

icalculator

Step 4: Print the results (optional).

iCalculator also enables you to print the results. This is no where near the quality of reports provided in the ProAPOD Real Estate Investment Software solutions (it’s merely a screen shot). But it does provide you a way to record your calculation if you wish to keep it for further reference.

So You Know

iCalculator computes dozens of calculations just as quickly and easily as that illustrated in this article for the fix and flip properties. It is 100% online so you can access it 24/7 from any device that has an internet connection. It includes a 5-day money back satisfaction guarantee, plus you can save 50% by virtue of this article.

Click here to learn more about iCalculator at real estate calculator your special discount.

 

Better Real Estate Bureau Directory Accepts ProAPOD

Better Real Estate BureauThe application ProAPOD Real Estate Investing Software submitted to the online Better Real Estate Bureau directory has been accepted. So we are now officially displayed in the Oregon section of their online real estate directory at ProAPOD BRB directory listing.

According to the publishers, “The Better Real Estate Bureau® was established to promote a superior level of commitment to integrity, honesty and responsibility among real estate professionals in their online practices.”

They also add that they are about building strong relationships between agent members who “are committed to reliable, unfaltering service excellence and superior performance in all aspects of the field” and consumers.

James Kobzeff, the developer and owner of the popular software company, has been a real estate professional for the past thirty years, and has long been committed to integrity and responsible business practices. As a strong supporter of the real estate community, he is dedicated to presenting it with only an excellent product and service.

So the union between ProAPOD and the directory makes a perfect fit. As a result, we now display the BRB badge on the homepage of our website. Of course, you are free to contact us if you have questions.

About ProAPOD Executive 10

Executive 10 is ProAPOD’s platinum-grade real estate analysis solution with full tax shelter and time value consideration, cash flow analysis and projections, marketing reports, and a myriad of advanced features.

With this solution, real estate agents and investors (experienced or not) can quickly and easily analyze the cash flows and profitability of any-size rental property (before and after taxes), as well as create a marketing package and executive summary when the property is listed for sale.

So it is an ideal software solution if you are seriously engaged in buying, listing, and selling rental property and want to start, build or grow that rental property investment business activity.

Origin

Executive 10 was developed in 2005 by ProAPOD following a string of requests from customers asking us to provide a software program with cash flow and rates of return computed after taxes as well as before taxes.

So we took our flagship software solution released earlier in 2000 (Agent 6) and beefed it up with elements for both tax shelter and time value of money.

The result is this real estate investing software solution (which has since become our most popular).

Overview

Executive 10 is a “deep-level” real estate analysis and marketing program. So agents, real estate investors, and other analysts can evaluate the profitability of income-producing properties (with full consideration for income taxes and time value) as well as create complete marketing presentations.

Features

A number of innovative features such as multiple depreciation schedules, a passive losses selection, and multiple cash flow projections options (for instance).

Calculations

Automatically computed for all the essential rates of return. Such as Cap Rate, Gross Rent Multiplier and Cash on Cash Return.

As well the more complex calculations associated with time value of money such as Internal Rate of Return (IRR) and Net Present Value (NPV).

Plus those associated with tax shelter. For instance, depreciation allowance, mortgage interest, loan point amortization, cash flow after taxes, sales proceeds after taxes (just to name a few).

Reports

A wide-range, all exceptional-quality, created in minutes, and each only requires the user to fill in the forms.

As a sampling, these include an APOD, Proforma Income Statement, Rent Roll, Property Photo Page, Comparative Market Analysis, Sales Proceeds. Of course there are many more reports (including charts), but you get the idea.

Price and Terms

Two licensed software downloads that include free updates for one full year. A one-time payment of just $279.95 (no annual subscription or renewal fees).

System Requirements

PC or compatible with Windows 98 (or later) and Microsoft Excel 97 (or later).

Learn More

You can discover all the calculations and features, as well as preview reports and screen shots starting from our website at ProAPOD Rental Property Investment Software or directly on our page for EXECUTIVE 10.