How Novice Real Estate Investors Can Validate the Numbers

novice investorNovice real estate investors routinely make the mistake of investing in a rental property based upon performance numbers given them by a real estate broker or seller.

However, this is not a good policy for the investor because rental property performance numbers can be skewed – even when it’s not intentional.

Bear in mind that most real estate analysis presentations are created by brokers and sellers who characteristically tend to be over-optimistic about the rental property’s cash flows and rates of return. As a result, the property valuation they present to investors often tend to reflect a “bottom line” that is more “pie-in-the-sky” than realistic.

Whereas experienced investors are typically able to discern and make corrections for unrealistic numbers, most novice real estate investors are not. Therefore they might inadvertently invest in a rental property property based on these faulty numbers only to discover later that the rental property is not as profitable as believed.

This of course is not good. However it can be prevented, and in this article I’m going to explain how.

How to Validate the Numbers

The solution for novice real estate investors is really quite simple.

Make a minimal investment in a real estate investor software solution so you can create your own real estate analysis. This way you can enter the property’s income and operating expense data based upon your own assumptions and determine first-hand what the cash flows, rates of return, and profitability are likely to be.

This not only can protect you from over-paying on a real estate investment, the reports created based upon your assumptions can be presented to the seller and used to perhaps negotiate a purchase price more in your favor.

A quality real estate investing software solution is not difficult to use (even for a novice) and it can purchased at an affordable price. So it really is worth serious consideration for novice real estate investors planning to engage in real estate investing.

So You Know

ProAPOD does provide a real estate investor software solution especially-developed for novices. In addition to a wide-range of cash flow and profitability presentations, it includes a formula-learning feature with over thirty real estate investment formulas.

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.