How to Use ProAPOD’s Loan-to-Value Sensitivity

Sensitivity analysis is a popular tool used by real estate analysts seeking to determine the best possible profitability scenario for investment properties because it involves changing one variable at a time over a possible range of outcomes to evaluate the effect of that change.

Sensitivity analysis thus allows the real estate analyst to review each variable’s impact upon the investment property’s present value and given template-based spreadsheet programs like ProAPOD® real estate investing software, a range of variables can be calculated and recalculated quickly, easily, and correctly.

ProAPOD® decided to include a “loan-to-value” sensitivity analysis in its software solutions because it provides a good way for users to evaluate monthly loan payment over a range of mortgage amounts at various interest rates. Moreover, the data appears in a table that is printable, so it makes a great investor presentation.

Creating a “loan-to-value” analysis is easy in ProAPOD®. Open the LoanInfo form and scroll down to the heading, “Loan to Interest.” In the appropriate field labeled “Loan Amount steps”, enter the dollar amount you want to “step” the loan. Then tab down to the field labeled “Interest Rate steps” and select (from the built-in menu) the amount you want to step the interest rate.

In case you’re wondering what a “step” implies, remember, you are asking our real estate investing software to create a “range” of values for a variable (in this case, loan amount and interest rate). The step you enter merely tells ProAPOD® the incremental value for that range. For example, if the investment property you want to purchase requires a loan amount of $350,000 and you step it $3,000, the range (created in the table) would include amounts for $343,000—347,000—350,000—353,000—356,000 and so on. Notice that each loan decreases and increases in incremental amounts of $3,000.

The step for interest rate does the same thing. Back to our example, if loan was based upon an interest rate of 7.0% and you step it 0.250, the table would create a range of interest rates like 6.750—7.000—7.250%. Notice that each rate decreases and increases in incremental amounts of 0.250%.

What benefit is the Loan to Interest analysis? You can quickly determine the monthly payment on a range of loan amounts at various interest rates. A cool feature, considering you get it in all our real estate investing software solutions.

Why not open ProAPOD® and give it a try. You can preview and print the report by looking for Loan-to-Interest Table.

James Kobzeff

James Kobzeff has over thirty years experience as a realtor and investment real estate specialist. He is the developer of ProAPOD real estate investment software and freely shares his real estate investing articles.