Real estate investment software is what real estate investors, agents and analysts use for conducting a real estate analysis on investment property to determine cash flows, rates of return and profitability.
This is common knowledge.
Quality real estate investment software software automatically creates the wide-range of rental property analysis and marketing reports required for personal investment real estate decisions as well as the presentations to customers, lenders and colleagues.
Okay, so it goes; fair enough.
But you, obviously understand that, otherwise you would not be reading this article. So let’s cut to the chase and tell you how to select a software solution that best meets your real estate investing objective and (more importantly) the amount of money you’re prepared to spend for a real estate investment tool.
So, let’s take a look at what my real estate investing experience has taught me about what you should consider when selecting real estate investment software.
Basics
- User-friendly. The software must be easy to use and understand.
- Appealing interface. You don’t want to stare at ugly. Preview the software’s screenshots to see what the forms look like. If screenshots are not provided by the developer, you might want to move on.
- Correct data and calculations. This goes without saying.
Elements
- Cash flow analysis. Obviously this is the point of real estate investment software. But it may only provide cash flows and rates of return “before taxes” and not provide the “deeper level” elements required for “after taxes” computations. For some, the primary “before taxes” computations are perfectly suitable; whereas others prefer to pay slightly more to have the “deeper level” elements as well. It really depends on your objective.
- Tax shelter consideration. This will add computations for “after tax” cash flows and rates of return including computations for depreciation, mortgage interest and amortized loan points. It is a beneficial element but totally optional. You can still create a highly-professional real estate analysis without tax shelter consideration, but it is recommended if you are actively engaged with real estate investing.
- Time value consideration. This will add the necessary “present value” and “future value” computations needed to create rates of return such as net present value and internal rate of return. Time value of money computations are typically included in software solutions with the elements of tax shelter, but be sure it does.
Features
Software solutions typically provide some features for your benefit, but it may impact the cost. So decide which features you can do without to avoid paying extra, and those you may want if possible. Here are a few suggestions.
- Pictures. It’s always nice to include pictures of the rental property you’re evaluating.
- Name rider. The more visible your name and business information is on the reports the better. At the very least you would want it on a cover sheet, but even better when it’s posted on every report.
- Unlimited units. You may want to evaluate a single-family rental or large apartment complex. So its best that the software doesn’t limit the number of rental units you can work with.
- Multiple loans. A good feature that enables you to include more than just a primary loan for the property.
Reports
You can expect most real estate investing software to create an APOD, Pro Forma Income Statement and Cover Sheet. But here’s a few other reports you may also want to consider for your real estate analysis presentations.
- Rent Roll.
- Marketing Package. Highly recommended if you also plan to market rental income property.
- Comparable Market Analysis. A good way to establish a property’s market value by comparing the prices similar-type properties in your local area recently sold.
- Scenario and Sensitivity. Allows you to quickly and easily see how changes in rents or financing could affect revenues, returns, and profitability.
- Photo Page.A picture is worth a thousand words. So your presentations will benefit when you can include more than one property picture.
Optionals
Optional elements do not affect the integrity of the numbers and may not benefit your real estate investing objective. But they are worth your consideration. After all, “more is better than less” when provided inside your budget.
- Projection “steps”. The ability to “step” future revenues and expenses when creating a Proforma Income Statement will enable you to make more realistic projections.
- Passive losses. Important if you want to select between “passive losses carried forward” and “losses taken currently” for your revenue projects.
- “Smart” forms. Forms with built-in selections, auto formatting, and “real time” calculations will save you time and help protect the integrity of your data entries.
- Canadian amortization. Canadian agents and investors would certainly want the investment software to compute the correct loan amortization used in Canada.
Cost
Real estate investment software typically starts at $100 and can climb as high as $3,000. Just bear in mind that software is not created equal, so do some digging to insure it provides the elements you want at the level of quality you expect.
So You Know
ProAPOD real estate investment software provides these elements and features in at least one of its three solutions at a very affordable price.
