Property Evaluator

There are three financial measures of return we use to evaluate the financial performance of an investment property. The three measures we utilize are the Cash on Cash Return, the Capitalization Rate (Cap Rate) and the Equity Accumulation Measure. The Cash on Cash Return takes the Effective Net Cash Flow and divides it by the Total Cash Required. The Cap Rate is calculated by taking the Net Operating Income and dividing it by the Purchase Price. Due to the fact that the properties are fully leased at closing, there is no vacancy in the year one calculations. We have built a model to quickly calculate these returns for you and to allow you to modify various assumptions in order to test the impact on the returns.

Below is an example of a property we have recently sold in the Atlanta Metropolitan market and the assumptions we used to calculate the returns. The model is available as a tab under each investment property.

 

Basic Purchase Information

Estimated Property Value $
Purchase Price $
Down Payment (%) $
Equity at Purchase $

Cash at Closing

Loan Amount $
Down Payment (%) $
Closing Costs (%) $
Total Cash Required
at Closing *
$
* This total does not include potential
escrow reserves for taxes & insurance

Mortgage Calculations

Loan Amount: $, Loan Term: yrs, Interest Rate: %
Mortgage Payment $
Mortgage Payment (Yearly) $

Financial Performance Summary

Cash on Cash Return
(Year 1)
Cap Rate (Year 1)
Total Equity at Year 5 $
Projected Monthly Cash Flow (Year 1) $

Assumptions for Calculations (Annual)

Gross Scheduled Income (Monthly) $
Mortgage Interest Rate (%)
Mortgage Down Payment (%)
Mortgage Loan Term (Fixed)
Property Taxes $
Insurance $
Homeowners Association (Yearly) $
Property Management Fee (%)
Maintenance Reserve (%)
Appreciation Rate (%)
Vacancy Allowance (%)
Rental Income Increase (%)
Property Tax Increase (%)
Closing Costs (Purchase) (%)
Closing Costs (Sale) (%)

Cash Flow and Equity Accumulation

CASH-FLOW MONTHLY YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 10 YEAR 20 YEAR 30
Gross Scheduled Income
Vacancy Allowance
Total Operating Income
Property Taxes
Insurance
Homeowners Association
Maintenance Reserve
Property Management
minus Total Operating Expenses
Net Operating Income
minus Mortgage Expense
GROSS CASH FLOW
Plus Principle Paydown
Plus Yearly Appreciation
EFFECTIVE NET CASH FLOW
 
EQUITY ACCUMULATION YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 10 YEAR 20 YEAR 30
Property Value
(Mortgage Balance)
EQUITY (WEALTH)
 
TAX BENEFIT YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 10 YEAR 20 YEAR 30
Depreciation
Mortgage Interest