This investment property analysis system is designed to allow a quick rating, and easy first cut comparison, of investment property opportunities.
It drives from the overall gross figures provided by the vendor or agent, or found in the newspaper or commercial property brochures.
This analysis will compare all opportunities on the same financial footing (apples to apples), and will allow you to sort them in order of their potential profitability. Then you can select the best prospective properties to obtain more information.
There are MANY other considerations associated with the selection of an investment property (location, neighborhood, market demand, esthetics, etc.), but none of these are significant, if the property is not attractive after a "return on investment" analysis.
Both INCOME and EQUITY must be considered for overall profitability of a property. By reducing the amortization period as much as possible, profitability is usually dramatically increased due to accelerated EQUITY. This will make your investment work harder for you.
Experiment with the mortgage rates and amortization periods to optimize your INCOME and EQUITY for the best annual profitability.
NOTE:
Even if you have cash for the down payment and work, it is best to analyze as though you didn't. By ammortizing all the capital expenditures, you compare on a level playing field. (purely for evaluation purposes to select the best financial opportunity).
This system allow for a quick comparison of both the CLEAR INCOME and the AVERAGE EQUITY GAIN each year. |
