Net Present Value (NPV) - the most accurate deal analysis?

[John K.]

Even though Net Present Value is used mainly in financial management I think it is probably the best ratio/calculation for analyzing a real estate deal. Unfortunately in Real Estate Analysis people usually use mainly return on investment or cash on cash return. These ratios are described in many books, but they don't take in count the time value of money and therefore NPV makes much more "real" picture of the investment.
I learned to use NPV and IRR back at the university and also in the book by Frank Gallinelli : What Every Real Estate Investor Needs to Know about Cash Flow... And 36 Other Key Financial Measures.
There is lot of successful investors at this forum, so I am interested what is everybody using in their Real Estate analysis? What are your opinions on NPV in Real Estate?

PS. This forum is great!

John

[Vikram C.]

No need to buy the book. I bought it and found it largely a waste of time. Here's what I would read:

Buffett's letters to his shareholders, which are available for free at BRK's site. http://www.berkshirehathaway.com/letters/letters.html

Buffett's letters when he ran a hedge fund that he referred to as the Buffett Partnership. I believe you can get those by googling or at this site: http://www.ticonline.com/buffett.partner.letters.html

Buffett's letters to shareholders are better from the perspective of understanding the bigger picture. The letters to partners are more useful if you wish to be a stock investor. They are both enjoyable to read because he has a very nice writing style with plenty of aphorisms, wit and humor.