All Forum Posts by: Account Closed

I hope that doesn't confuse him as it seems a very narrow way to look at the purpose of the IRR.

The IRR by definition is the discount rate that makes project cash flows equal the investment but some users of the IRR may view the use and purpose of the IRR as an investment evaluation tool for measuring the profitability, efficiency and quality of an investment compared to other alternatives.

The discount rate typically is the 'cost of funds'. Another way to look at it is the rate of return required by the investor to invest in the project. Different investors may require a different rate of return for their money based on the nature of the project and the perceived risk. The discount rate will typically only affect the Net Present Value NPV and not the IRR. The IRR also does have to be higher than the discount rate for the deal to make sense.

It's usually best to develop an analysis tool that is specific to your particular investment strategy. Most of the cookie cutter tools out there might be too general and with too little or too much information/variables to fit your particular case.

This really depends on the investor and nature of the deal. The net present value for instance would be a useful tool for many 'buy and hold' investors who acquire rentals, fix and rent the property (or properties) for a few years then sell them 5 or 8 years down the line. 

The IRR would also be applicable for such analysis. The central theme is to determine what the present value of all future project cash flows are worth today.

If you are just buying and flipping properties in 6 months or less, from a time value of money perspective, there are probably more simple forms of evaluating shorter term projects and probably why there often isn't much mention of it here.

You only use 'net cash flow' for computing IRRs, net present value etc. On rentals you want to use net operating income.

You might want to look at this to see how others are deriving their net operating income: http://www.biggerpockets.com/renewsblog/2013/01/19/real-estate-math/

You want to put a dollar value on 'minimal work'. Also, how are you getting the 89K value/ARV and why are they requesting an amount higher than the ARV on a property that does require some more work? Is the property for rental or fix and resale?

Somebody tell me this is a joke right.. its got to be. 

You made a 40K 'donation' to this company for information on how to raise your credit card limit by 40K? 

Folks, am I misreading this or what am I missing here? You have got to be kidding me. So how much have they given you back this far?

 It sounds like this is who you need to talk to: [email protected] ; this stuff often varies by state.

You want to either have access to MLS based sales comp data or have a realtor get you the information.

You will hear different people use zillow or other websites as the sole basis for deriving ARV. Doing such is as risky as whatever risk this fish took to get in the apparent predicament the fish appears to be in.

This varies on the business model and investor exit strategy. Either route and the investors personal circumstances may often have a different tax consequence that might essentially determine which route or business model the investor decides to utilize. Some like rental properties, some think renting could be a serious headache and yet at some stage some may try both. 

Like with any investment instrument or strategy, it does have to do with your risk tolerance, how you like to get paid, what you are familiar with etc.