All Forum Posts by: Colin Middel

the debt coverage ratio also uses the NOI which includes P&I. This also doesn't make sense to me.

Hey all

I have been creating my own spreadsheets and basing it off the BP calculator for a rental property. I found that Bigger pockets definition of NOI includes principle and interest. This also is reflected in the calculated in the pro forma and purchased Cap rate. Shouldn't NOI be equal to the annual cash flow?

For example. The property I am analyzing gives a annual cash flow of $3,326.26, whereas (according to the BP calculator), my NOI is 17552. through guess and check, I determined that the 17552 is my P and I of 1185.48 * 12 plus 3326.26.

Cans someone please give me an explanation of why i should or shouldn't include P&I in my NOI? Is is simply because that is how you calculate the cap rate? It doesn't make sense to me that you would include P&I. My guess is you would include the principle because you are gaining equity during that specific year, however interest certainly is not a gain.

Chris, thank you for the response. That absolutely makes more sense, thinking back to my financial math classes in school. Should paint a solid picture of future earnings. When you look into properties, how do you prefer to analyze properties? Cash on cash? IRR? Strictly cash flow?

Hey all - Relatively new to the REI market. Recently built a spreadsheet for myself to analyze properties and get a better feel for the market. I have a lot of similar characteristics from the online tool on BP. However, I have made some changes that fit my eye better to provide a more thorough cash flow & investment analysis.

One problem I am having trouble with, (this is literally the last piece i am looking to add before I get more complex with what the spreadsheet spits out: taxes, market fluctuations, etc...) is the "Annualized Total Return" analysis on the BP calculator. Part of why I am building my own spreadsheet is to get comfortable with the numbers, and to not just know what good returns are, but to truly understand the story behind the numbers. When I calculate out the annualized return on my spreadsheet, my first year always matches the first year on BP, however every single year after that is wrong. I understand it is the average over the entire investment.  Does this require a geometric average?  

This is my formula. Annualized Total Return = (Total Profit if Sold / Total Cash Needed to Purchase Property) / Year X

Year X = whatever year it is. 

To boil it all down, can someone provide me with an in depth definition and formula based on the BP calculator to correct my excel spreadsheet? My Total Profit if sold  and total cash needed numbers are exactly the same as the BP calculator.