All Forum Posts by: Brad E.

Hi, this is an excel question as much is it is an investment question, but I am wondering if folks here can provide any insight on how excel is taking cash flows as inputs.

I have series of cash flows in a single row. These are initial investment and yearly rental income.

When calculating IRR, my understanding is that we should include sale proceeds as part of the final year cash flow. This is a key assumption to my problem so if that is incorrect please let me know.

The excel formula of course uses the syntax IRR(values, guess)

For this example:
- Row 1 will hold yearly cash flow for years 1-5.
- Row 3 will hold sale proceeds
- I will sell the property in year 5


So it will look like this:

A1= 100 (cash outflow)
B1= 10
C1= 15
D1= 15
E1= 15
E3 = 25 (proceeds from sale of asset)

Here is the formula I am using to calculate this
=IRR((A1:E1,E3))

This will return a value but I am not sure if it is the correct way to calculate this because I am not sure how Excel is interpreting these flows with regard to timing.

I know that the extra set of () will allow you to use non-contiguous cells in the calculation and excel will see everything inside as a range of cells for the calculation.

If all the above is correct, my thought is that I should be adding the sale proceed to the final year cash flow from operating the property (E1+E3) and then using the result to calculate IRR.

If I try something like this is get an error: =IRR((A1:E1+E3))

With the first forumla above, my concern is that it is interpreting cell E3 as separate cash flow from a subsequent period, rather than occurring in the same period as the final operating cash flow.

This is minor distinction but I want to make sure I'm calculating this correctly.

I know I could add a new row that would hold the total cash flow (eg D4=D1+D3) and use D4 in the IRR calculation instead, but I feel like there should be a cleaner way.

Can someone set me straight on this? Thanks in advance.

Thanks @Anthony Gayden !

I totally overlooked not being able to sell them individually when I get ready to exit.  That's a big one.  

Also I just heard back on the residential rate and it is also 5.5%. 

@Terry Lao

I'll just throw in my 2 cent here....

I think in general this is a limiting belief. I think it depends on how you define success.  In a situation where there can be only 1 'winner' (sports game, a specific real estate transaction etc) it is true that 1 person 'had the higher score' when the time ran out.  

However the other party/team, even though the may have 'lost', certainly walked away with something they didnt have before.  Personally I place a high value on learning, so even though I may have 'lost' I still 'won' (i.e. was successful) in gaining knowledge and experience from playing the game.  From that perspective I see it as some one 'won bigger' than the other person but both have gained something of value.

On the other hand if you look at a score board or a signed contract as the single measure of success then I suppose you are right.  

Hi BP!

Im offering on 2 duplexes that are next door to each other, owned by the same seller.  When looking at financing options what I've found is that I can do a single commercial loan which would be a 5 yr balloon amortized over 20 yrs or two residential 30 loans.  The rate on the commercial loan would be in the 5% range and I am not sure yet on what the rate will be on the residential.  I am guessing it will come back in the 4% range.

I am trying to decide which way to go here and I would love some insight from the community on what things to be taking into consideration for the decision.

Things I've thought of so far are:

- Loan costs - originating 1 should be cheaper than originating 2.

- Refinance costs - I'd have to refi in 5 years and who knows where rates will be

- Refinance risk - related to the bullet above, but there is risk around not being able to refi at all due to economic conditions in the future

- I can get the commercial loan in my LLC name. Not really sure if there is some benefit to this

- The commercial loan wouldn't count against my total allowable fannie mae loans

- Hassle - this is hard to quantify, but dealing with 1 loan just seems easier overall 

What are some other things I should be thinking about here?  I would be interested to hear any positive and negative risks that I'm failing to include.  

Thanks in advance for sharing your thoughts!

Makes sense.  Thanks!

Hi all - I have been considering a house hack and I am wondering how you can get a loan as the occupant if you purchase a property that has current tenants with leases.  

What are the requirements in terms of how soon you have to move in when you obtain one of these type loans?  Thanks.

So I'm looking at a deal with that is for 2 houses on a single lot.   Both have current tenants which have been there 7-8 years and appear to be major hoarders.  When I went in to view the property cat urine smell hit me so hard I almost fell down.  I was so grossed out I wanted to burn my clothes when I left.  

Given the condition of the property I am not sure how to go about evaluating it.  You can't see the floor in most of the rooms in both houses.  

Any thoughts on how to approach this and come up with my MAO? Should I just assume a total tear out all the way down to the studs?

Not sure how to know if there is anything even salvageable when I cant see past the garbage.  

Also, is there anything that I should be looking for specifically during due diligence related to the hoarding?  (I am guessing there are common problems with these type properties)

Hi guys - 

There is a huge development off the side of a 4 lane highway near my home that I want to identify.  

At this point there is a massive area of cleared land and a gang of earth-mover tractors and a few of the construction company signs visible.

I can't really estimate the size of the clearing but it looks like it could be a huge shopping center or maybe just a massive warehouse.

What I want to know is how would I go about finding out what is being developed on this land before its completed?  

Thanks!