Financial Analysis Of Property
Friday, June 27th, 2008 Subscribe To Our Feed
To get the most out of your profits when investing in real estate, it is imperative to scrutinize the numbers pertaining to your prospective real estate purchases just as you would do with stocks.
Once you have settled on the area that you are going to invest in (the factors you should take into consideration when picking a target area are taught by real estate educators such as Hans Jakobi, but fall beyond the range of this article), you should bring along a broad Inspection Checklist which you can tick off whilst inspecting each property.
You could define your own such check list, find one on the internet, or otherwise use a real estate analysis software designed for this function.
One such award winning software program is the POSH Property Owner System. POSH Property Owner System is in actual fact 2 programs in 1, as it contains a Property Analysis Component, in addition to a comprehensive Management Component.
The total workflow of the software program is actually conceptualized to mimic the real estate investment progression from inspection, through to acquisition, funding, renting out, and finally selling.
The Analysis Part enables you to dissect and contrast several prospective acquisitions against one another with a comprehensive Inspection Checklist which you can print out and take with you when viewing possible acquisitions.
Afterwards, upon getting back to your home or office, you can submit your entries into the program in order to evaluate gross vs net yields, $ per square foot, price-earnings ratios, internal rate of return, forecast capital appreciation, and before and after tax cash flow. The reports it then outputs will enable you to scrutinize and compare various prospective purchases against one another.
Outside of the analysis features of the program, it also enables you to manage your real estate portfolio by allowing you to enter and keep track of all revenue and expenses pertaining to each of your properties. This includes such things as loan interest and related mortgage and refinance costs, tenancy and lease information, property management costs, council and water rates and insurance, and maintenance expenses.
Once entered, Posh Real Estate Software allows you to output detailed revenue and outgoings reports, depreciation schedules, rent receipts, and can compute your capital gains tax you would need to pay upon sale of the property. Another function allows you to create a thorough budget and compare it, as time passes, with your actual revenue and expenses.
In addition to the benefits sumarised above, using software like the POSH Property Owner System will also ease your workload at tax time. With all of your revenue and outgoings data pre-entered as it was incurred during the course of the previous year, you only need to press a few buttons to generate a handful of reports to bring to your accountant, and these will hold all the data he or she is likely to require to prepare your tax return.
Maybe you are not planning to be the next Rick Otton in real estate investing, with dozens upon dozens of properties in your portfolio, but you need not be in order for the POSH Software to be of significant help and benefit to you. Real Estate investing is a capital intensive activity, so the cost of a software program like POSH is trivial when compared with the financial benefit you could glean from the education and breakdown provided in the Analysis Component of this program in supporting you to select a property that is likely to better the others in a given location.
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