Entering Drivers

Select the date of acquisition from the drop down menu.  This sets the beginning point

Enter the amount of capital that you have available for this investment.  The model will alert you if the calculated cash requirements to close exceed this amount.

Enter the maximum acceptable loan to value ratio for this investment.  The model will alert you if the proposed financing exceeds this ratio.

Enter the minimum acceptable debt service coverage ratio for this investment.  The model will alert you if the proposed financing is not supported by the available cash.

Enter the capitalization rate (CAP rate) for this investment.  The CAP rate will be used to value the investment initially, and to value the investment at the time of resale (if you select that option).  To see the definition of Cap Rate, See: Real Estate Dictionary

Enter the growth rate for the income stream.  This number will be used to increase rents annually after stabilization has been achieved.

Enter the annual growth rate for the operating expenses.

Enter the maximum operating expense ratio for this investment.  The model will alert you in the Observations section if the property will not support this ratio.

These two entries are used by the model to compute the Modified Internal Rate of Return. MIRR is an alternative calculation to Internal Rate of Return (IRR) which will not compute if results contain negative values.  The Safe Rate is the rate at which your are certain you could invest the cash and get a safe return.  A short term CD or overnight rates would be applicable here.

 

The Reinvest Rate is the rate at which you believe you could reinvest your positive cash flows in a similar piece of property, with similar risks.  To find out more about these drivers, see: Real Estate Dictionary

Enter the minimum acceptable cash on cash return for this investment.  The model will alert you if the return falls short of this specification.