Real estate investing calculations are made on investment properties for the purpose of determining a property’s cash flow, rate of return, and profitability. Somewhat like a mathematical “tire kicking” of real estate investment property.
When a real estate investor or other real estate professional is evaluating an income producing property, or perhaps comparing several real estate investing opportunities, real estate investing calculations, computed by formula, are made to create financial measures, returns, and ratios that provide real estate investors a snap shot of property performance.
Real estate investing calculations cover a broad spectrum, with some requiring little more than a simple math calculation anyone with a pad and pencil can compute over burger and fries, and others, like those involving time value of money, which require a financial calculator or sophisticated real estate investing software.
Here are just fifteen real estate investing calculations often made and considered during real estate investment property evaluation:
- Gross Rent Multiplier (GRM)
- Vacancy & Credit Loss
- Net Operating Income (NOI)
- Capitalization Rate
- Annual Debt Service (ADS)
- Cash Flow Before Tax (CFBT)
- Cash on Cash return (C-o-C)
- Loan to Value (LTV)
- Debt Coverage Ratio (DCR)
- Break-Even Ratio (BER)
- Debt Coverage Ratio (DCR)
- Cash Flow After Tax (CFAT)
- Return on Equity (ROE)
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
ProAPOD Real Estate Investment Software computes these real estate investing calculations and more automatically. ProAPOD Real Estate Investor Software also makes these real estate investing calculations automatically, plus includes a Learning Center feature where you can learn the formulas for these real estate investing calculations directly on the easy-to-use forms.
