Investment Evaluation

Investment Evaluation

ROI analysis is the most critical piece of success with investment properties.  In fact, most industry veterans make money when they acquire property and not when they liquidate it.  So unless you are buying investment properties for cash the ROI analysis will be the difference between making money or losing money.

That’s why we like a neat iPad or iPhone App called Property Evaluator  from Wasatch Digital Media Inc. This app offer Purchase Analysis, Buy and Hold Strategy.  

Once you enter the specific property information, this App offers a maximum of 3 Expense categories to for ROI analysis for a 5 year old period.  The category of expense for the Free Version are:

  1.  Cleaning & Maintenance (0.8% of the purchase price)
  2. Insurance (0.5% of purchase price).
  3. Taxes (1% of purchase price)

The app has an Assumption sections has the following information which can be modified:

  • Appreciation Rate:     2%
  • Vacancy Rate:              7%
  • Income Inflation:      3% (We had to change this one since incomes have been stagnant for the past 10 years)
  • Expense Inflation:      3%
  • LTV for Refinance:     70%
  • Closing Costs:
  • Currency:
  • Area Units:                            Sq Ft
  • Compounding Period :      Monthly

We tested this app with one of our rental properties in Los Gatos for a purchase price of $1,000,000 with an equity of $250,000.   The app offers 1st and 2nd mortgage input that users can add for the purchase of purchase analysis.

The best part of app was the Buy and Hold Projections that in 20 years with a projected Rental Income of $5,000 per month from this Los Gatos home, the market value of the property would be $2,257,339 offering the buyer an equity of $1,784,387.   This is valuable information to have on each property for an investor who is interesting in holding a property for rental income.

Let us know if you have used this application and what your experience has been.

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