Real Estate Investing (Excel Modeling)

Let's get together and talk about real estate investing. More specifically, we'l talk about how to model a real estate deal (in Microsoft Excel) and get to the heart of the numbers.

Lot of times (and I'm guilty of this), investors get enamored with a great property (great location, great rental income etc.) but forget to adjust for the leverage factor. For instance, a lot of commercial loans tend to be either 20% or 25% down. This means that your money is leveraged 5 to 1 and 4 to 1. When modeling real estate deals you must account for this and calculate two different numbers (your levered return as well as your unlevered return). Only then can you compare apples to apples. A lot of novice investors also forget to account for expenses such as vacancy allowance, maintenance, and management fees (it doesn't matter if you are going to be managing the property yourself; you must still adjust for this to get an accurate assessment of the true potential of the project.

We will also discuss several government programs where you can buy rental properties (up to a 4-unit) with only 3.5 % down. There are some programs where you can even buy with 0% down (not a multi-unit though). Finally, we'll top it off with a discussion about an IRS credit that lets you write off up to $2,000 dollars from your tax bill if you meet certain criteria. Keep in mind that this is a credit and not a deduction and therefore, a dollar for dollar reduction of your tax bill.

Hope to see you there.