Re: The mistery of Cash Flow Analisys! - Posted by Rich
Posted by Rich on November 28, 2000 at 21:54:07:
Cashflow is no mystery. It doesn’t have to be a chore.
I did my own automation for figuring cashflow. I created a spreadsheet template in Excel that has 80% financed and 90% financed calculations already done. I just plug in the asking price (I adjust down 5-10% to calculate the price I will offer). I plug in my annual rents minus a 10% or 20% vacancy rate to get gross income.
Now I start to plug in my expenses: Taxes, insurance, gas/oil heat, snow removal/lawn care, water/sewer, trash, licenses, electricity. I put in a budget for replacements (appliances, etc.), and a maintenance fee (usually $45-55/unit/mo). I pay myself a management fee of 6% of gross income.
When I subtract my expenses from my gross income, I get Net Operating Income. This is what I have available for debt service.
My spreadsheets have built-in calcs for P+I at 80% and 90% financing, so I can see if the debt service is adequate. (I also have calcs for 2nd mortgages if needed).
I then calculate my down payment (if any), closing costs, and rehab costs to give my total investment.
My sheet automatically amortizes my investment over the life of the loan(s) to show my payback period for my investment, and ROI.
I spent some time to do the spreadsheet once, saved it as an Excel template, and use it over and over. I create a Workbook for each property I analyze, and plug them into an Access database (along with pictures, descriptions, faxes, seller info sheets, contact information, etc.).
BTW, it takes me about 2 minutes to plug figures for a potential investment property into this sheet. I have a summary line at the top of each workbook which gives me a snapshot of my investment, cashflow, ROI, and payback period.
I even exported this spreadsheet to my PalmPilot (I use TinySheet on my Palm) so I don’t have to drag a laptop with me – I can do the same calcs (not formatted as nicely) on my Palm if I’m out and about, then export the data when I synch my Palm with my computer.
Standard MS Office tools – a little bit of thought and work to build the template and MS Access database, and I have a no-brainer, plug it in, cashflow analysis.
If you plan to do many investment properties, or even to get to your first, spend the time to build the spreadsheet yourself – it will help you understand all the components that you should/can include in your analysis. Look on the boards here, and take their advice. Read Sheets, Kiyosaki, Allen, and others.
There is no mystery, just education.
Good luck! (BTW, I won’t sell or give away my templates because I do NOT want to EVER maintain them for someone else).