All Forum Posts by: Adam M.

Yeah net present value takes into account time value of money. Time value of money is the concept that the timing of cash flows will impact their value to you.

For example would you rather have $10k today or $10k a year from now? Obviously $10k today because you could invest it at any interest rate > 0.0% and in a year it would be worth more than $10k. The next question would be how much is $10k 1 year from now worth to me. Well lets say you could invest at 5%. That is your opportunity cost. Calculating the NPV of that would mean the value of that $10k cash 1 year from now is only worth $9,523.81 to you. Excel has this build in NPV(discount_rate_per_period, periodic_cash_flows). So in my example your discount rate is 5%/yr and the $10k is only 1 year out so the cell formula would be NPV(0.05, 10000).

An easier way of thinking about how much money you will make off the CF vs exit proceeds is if you simply added up the total amount of money from the annual cash flow and compared it to the net proceeds from the future sale of the property. With my CF table that looks like this.

To make a solid return on SFH you really do have to sell it at some point. I hope this all makes sense.

Also nearly $2900 for property taxes seems really steep on a $75k home (nearly 4% my county is like 1.6%). You should look at property records for your county. You should be able to find the actual amount in property taxes paid as well as the assessed value of the property.

Yeah I get what you are saying but I go with my brother's advice (10 yrs commercial RE appraiser) and that is what he told me. Plus if you think about it if the property is maintained the price is likely not gonna go down and so you should take into account equity gained. I am conservative in my price appreciation estimates at 1.5% annual.

Also since this is a SFH 70% of the NPV (net present value) is gonna come from the proceeds on exit. Annual CF won't make the majority of the money on the deal. Just my thoughts.

Your ROI is your cash on cash. So your 9% isn't correct it is 15.5%

cash-on-cash = (1st year principal paid off + Annual EBITA) / down payment

You should think about calculating you IRR as it takes into account price appreciation and exit proceeds.

Here is an example of my projected CF.

Then use the IRR function on the totals.

Net proceeds should be the price appreciation - principal - commission.

Wanted to share some screen shots of my SFH model I use for market analysis to give some people ideas as well as hear what other people think.

First section is the Current Listings where I enter data from Zillow.

I originally started out w/ only 5 listings but the more the merrier so I expanded to 7 listings. First row is my Include row which is simply a 1 or a 0 on whether to use it in the calculations on the right. Sometimes I will enter a property and realize it is not really that much of a comparable. As you can see I enter the basic stats for the properties and calculate various averages as well as % differences based on those averages. I obviously am a big user of conditional formatting as it makes it easier to quickly see what looks appealing. At the bottom I have an implied rent value based on a later section that compares advertised rental rates.

Next section is the Recently Sold section which is effectively the same as the current listings.

I've noticed in my area there isn't a lot of recently sold data. I can usually find enough though.

Finally is my Rental Advertisements section, which, again I am simply plugging in data from Zillow. This is also where I get the value for my implied rental rates from the first section. I use the average $/sqft.

Thats about it. Again wanted to share to give some people some ideas as well as hear back from people on their models. This is currently in google sheets and I have been meaning to move it to Excel and make it into a template. If you don't know how to make a spreadsheet into a template you should look it up. Helps avoid overwriting old models and having to open spreadsheets and saving as.

Bump. New here but has anyone considered using meetup.com to make it more formal?

From Gardner. Good place the have that new BNSF intermodal and the warehouse jobs keep adding up. Housing prices have skyrocketed. Amazing market to be in right now.

Yeah doubtful I would close anytime soon but if given a hard money/rehab loan finance situation with the terms being 12-18 months paying several months of debt service waiting for tenants to leave would wipe out any equity upside. Also would want to have to move in ready by August since it would likely be a student rental and that is just the cycle.

Looking at a BRRRR with tenants leased till end of July 2017 in a college town and in a solid rental neighborhood. So would need to get tenants out and have enough time for rehab, releasing, and occupied by August. Given this timeframe I would likely try and structure the deal as follows.

• Deal is contingent on tenants leaving May 31st.
• Closing will be 3-7 days after tenants vacate.
• Offer tenants full security deposit and half months rent to terminate lease.
• possibly offer discounted rent to release in August.
• Contingent on financing.

Obviously there are a lot of details left out. What are you thoughts?

Alright man thanks for the help. Never thought about how my own realtor would react! Will have to keep that in mind. Also with this property being leased till end of July. How should I go about dealing with the current tenants? Ideally I would structure the deal such that it was contingent on the tenants moving out by May 31st, even if I would have to pay them a half month to a month of rent to leave, then close a week/couple days later. That would give me 6-8 weeks for reno and be back on the market for August. Anyone every done a deal like this?