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Real Estate Investment Analysis

Business Type: Real Estate / Property Management

 

The Goal: Use SUM logic for Net Operating Income (NOI) and Percentage logic for ROI.

 

1. The Strategy (The Logic)

  • Net Operating Income (NOI): Total Income minus all Operating Expenses (excluding mortgage).
  • Cap Rate (Capitalization Rate): The natural rate of return if you bought the property in cash.
  • Cash-on-Cash Return: The actual return on the specific dollars you took out of your bank account for the down payment.

2. The Property Income & Expense Table

Category

Monthly

Annual

Formula / Logic

A
B
C
D
1
Gross Rental Income
$4,500.00
$54,000.00
Total rent from all units
2
Vacancy Factor (5%)
$225.00
$2,700.00
Gross * 0.05 (Safety buffer)
3
Property Taxes
$400.00
$4,800.00
Local government tax
4
Insurance
$150.00
$1,800.00
Landlord insurance policy
5
Maintenance/Repairs
$250.00
$3,000.00
5-10% of rent for repairs
6
Management Fees
$360.00
$4,320.00
8% for a property manager
7
NET OPERATING INCOME (NOI)
$3,115.00
$37,380.00
Income - All Expenses

3. The Investment Health Formulas

A. Cap Rate (The Market Value Tool)

If the property is being sold for $500,000, we find the Cap Rate to see if it's a "good deal" compared to the neighborhood.

 

The property is being sold for

$500,000.00

Capitalization Rate (Market Value) %

7.48

Insight: In most markets, a 7-8% Cap Rate is a very solid investment.

B. Cash-on-Cash Return (The "My Money" Tool)

If you put $100,000 down (20%) and your mortgage is $2,200/month, how much cash is actually hitting your pocket?

 

Down Payment

$100,000.00

Your Mortgage

$2,200.00

Annual Cash Flow

$10,980.00

Cash-on-Cash Return (%)

10.98

4. Advanced Status Logic: "The Investment Grade"

We use IF logic to help an investor decide if they should buy or pass.

 

The Formula: =IF(Cash on Cash > 0.12, "💎 HOME RUN", IF(Cash on Cash > 0.08, "✅ STRONG BUY", "⚠️ PASS / NEGOTIATE"))

 

The "Pass/Fail" Filter

Property

Cap Rate (%)

Cash-on-Cash (%)

Status

A
B
C
D
1
123 Main St
7.48
10.98
✅ STRONG BUY
2
456 Oak Ave
5.2
4.5
⚠️ PASS / NEGOTIATE
3
789 Pine Ln
9.1
14.2
💎 HOME RUN

Form Template Insights

Please remove this form template insight sections before publishing.

Form Insight: Real Estate Investment Analysis

Purpose: This tool is used to evaluate the financial viability of a rental property. It strips away the emotional appeal of a building and focuses on Cash Flow, Market Yield, and Equity Growth. It allows investors to compare different properties "apples-to-apples" regardless of price or location.

Why Use This Form?

Real estate is a capital-intensive business. A mistake in estimating expenses or overestimating rent can lead to a "negative carry" (where you pay money every month to own the property). This form identifies those risks before you sign a contract.

 

1. Mastering the Formulas

Your form owners need to understand that the "Net Operating Income" is the heartbeat of every other calculation.

A. Net Operating Income (NOI)

  • The Problem: Many owners forget to account for "hidden" costs like vacancies or property management.
  • The Formula: (Gross Rent - Vacancy Factor) - Operating Expenses
  • The Logic: This is the total cash the property generates before any mortgage is paid. It represents the "raw power" of the asset.

B. The Cap Rate (The Market Ruler)

  • The Problem: How do you know if a $500,000 house is a better deal than a $300,000 condo?
  • The Formula: = Annual NOI / Purchase Price
  • The Logic: This is the "Speedometer" of the investment. It tells you the percentage return you would get if you paid all cash. It allows you to compare the property to other investment vehicles like stocks or bonds.

C. Cash-on-Cash Return (The Wallet Metric)

  • The Problem: Most people use debt (mortgages) to buy houses. Cap Rate doesn't account for that debt.
  • The Formula: = Annual Cash Flow / Total Cash Invested
  • The Logic: This tells you exactly what kind of return you are getting on the actual money you took out of your savings account for the down payment and closing costs.
 

2. Key Business Insights

This form provides three "Strategic Shields" for the investor:

  1. The Safety Margin (Vacancy Factor): By including a 5% or 10% Vacancy Factor, the form ensures the property remains profitable even if a tenant moves out and it sits empty for a month.
  2. Expense Ratio Analysis: If Operating Expenses are higher than 40% of the Gross Income, the form flags an efficiency issue. Either the expenses are too high, or the rent is too low.
  3. The "Pass/Fail" Filter: Using the Status Logic, the form owner can quickly filter through 20 different property listings and only focus on the 2 or 3 that meet their "Strong Buy" criteria.


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