Tag: real estate investment analysis

NEW Version 20 of Real Estate Investment Analysis Pro Edition Software

We’re very excited to announce the release of new Version 20 of our Real Estate Investment Analysis software. This application has been the go-to solution for thousands of income-property investors since its first release in 1982.

(No, that’s not a typo. We’re proud to report almost four decades of enhancements based on users’ feedback.)

Version 20 has big new features and a whole new outlook on both development and investment properties. It has you covered on all fronts — buy and hold, build and hold, fix and flip, value-add — now you can model them all with one software program.

At its core, Real Estate Investment Analysis (REIA) is income-property investment analysis software for all who deal with commercial or residential income properties: individual and institutional investors, developers, brokers, lenders, accountants, portfolio managers, financial planners, builders, and architects.

It helps you make detailed income and expense projections, before- and after-tax cash flow calculations, key ROI measurements, partnership analyses, and a great deal more.

New functionality in v20 brings you month-by-month development cash flow planning, with drawdown construction loan for value-add, renovation, even construction from the ground up. Evaluate the development phase, then see how holding the property produces returns over time.

Get the full scoop here about new version 20.

Copyright 2020, RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

New content in my online video course

Those of you who are already enrolled in my course, Introduction to Real Estate Investment Analysis, are probably aware that I’ve been regularly adding new content to the course over time.

My most recent addition is a lesson on “Phantom Income.” The lesson discusses how and when it might be possible for your taxable income to outpace your cash flow. Probably something you’d prefer to avoid if you could.

New content like this is always available at no charge to those who are enrolled in the course, but for a limited time this new lesson will be my treat to anyone who would like to view it.

So, even if you’re not already enrolled, just go to the course home page, and scroll down about two-thirds, past my smiling face, until you see the curriculum. You can find the lesson in the middle of the section called Real Estate Pro Formas. Click the Preview button to watch.


In case you missed it, I also added a three-part series this summer called, “Blend and Extend.” 

This is a technique that landlords and tenants have used during difficult times in the past — a technique where a bit of give and take could potentially benefit both parties. A timely topic, I believe, given the upheaval in commercial real estate during the pandemic.

I’m making the first video in the series available as a free preview. Again, go to the curriculum, but this time expand it and scroll to the very bottom to find “Blend and Extend.” That’s where you can preview Part 1.

In the two remaining lesson in this series, I go into more specifics about the ways you might actually run the numbers on a possible lease restructuring to find a scenario acceptable to both sides. I include examples was well as an Excel model that should help you with the calculations.

Since the original release of the course, I’ve added a great deal to my core content, including a series of case study examples, as well as modules on partnerships, development projects, and value-add investments.

But I’m always enthusiastic about broadening the scope of the learning you can derive and the benefits you can reap from the course. Do you have an idea for an additional topic you’d like to see? If so, please pass along your suggestion in the comments section! Thank you.

— Frank G

Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

RealData’s Commercial Income Worksheet

The Commercial Income worksheet in RealData’s REIA Pro software is one of its leading power features that makes it a stand-out tool for investment analysis.

It’s designed to allow you to enter income from any number of tenants with great flexibility, and to model a lease scenario of any size or shape.

In this video we’ll have a quick overview of how this feature works, and how it can help you when you’re evaluating a commercial income property.

Click here to watch

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Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

“The Top 10 Real Estate Finance Books Every Investor Should Read.”

investment book

I was honored to find that one of my books was featured at the top of a recent article on Motley Fool: “The Top 10 Real Estate Finance Books Every Investor Should Read.” The book, “What Every Real Estate Investor Needs to Know About Cash Flow,” was originally published in 2004, is now in its third edition, and is alive and still doing well —  a surprise certainly to me, and probably to the publisher as well.

I often get asked what accounts for the book’s long-term appeal, and I think there may be two reasons: First, I avoided “topical” or trendy content, preferring to stick with core concepts and math-based metrics don’t change with time. And second because I really dislike the get-rich quick hype that seems to characterize so many real estate books, and so I shunned that, too.

I don’t think they’ll ever make a movie out of it, but I’m satisfied if it has helped some readers make informed and unemotional investment decisions.

You can find the article here.

The RealData Software Menu — A Tool to Streamline Your Work

Have you ever had to scramble around a large DIY Excel model to find some key piece of information? Or churned out a ream of paper trying to format a report that a human could actually read?

We’ve all been there. And that’s why we built a unique menu that automatically adds itself to Excel when you run a RealData program.

In this video, we’ll show you how you can use that menu to streamline and simplify your real estate analysis work when you’re using RealData software.

Click here to watch.

In this video, we’ll show you how to use the custom menu that we add to your Excel toolbar whenever you’re using RealData software. It can really make your job a lot easier, especially when you’re working with a powerful program like our Real Estate Investment Analysis, Pro. Edition.

This is the third in our series demonstrating key features of RealData’s software for real estate investors and developers. More to come.

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Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

Leverage the Power of Excel to Extend your RealData Software

In our last post, we introduced our new series of short video that are designed to highlight some of the key features of our applications and help you get the most out of your RealData software. In that video we showed you the how REIA Pro could be used in any of three different modes — a detailed, long-term analysis; a quick analysis; and a short-term view, ideally suited to fix-and flip.

RealData software for real estate investors use Excel as their engine, so they offer you a familiar landscape on which to work. But you can easily go further by expanding on our products to customize them for your specific needs. In this second video, we show you some of the ways you can leverage the power of Excel to extend the functionality of RealData software.

To watch now, just click here.

And stay tuned for our next video, about using the custom menu that all RealData products add to Excel to make your work easier.

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Copyright 2020,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles that appear on realdata.com is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

10 Mistakes To Avoid When You Invest in Real Estate

I’ve been involved in real estate for more than 40 years, much of it teaching about real estate investing, answering questions online, and supporting folks who use my company’s investment analysis software —so I’ve gotten to see a lot about how people think (and sometimes don’t think). From that experience, I want to share my list of “greatest hits,” mistakes that can really trip you up:

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1. Admiring the King’s New Clothes

I see a lot of first-timers get wrapped up in the aesthetics of a property. Is it an attractive, solid building? Is it in a desirable location? Would I be proud to tell people that this my property? Unfortunately, for some new investors, that’s where their critical evaluation ends. They see only what they want to see.

It’s nice to feel good about the commitment you’re going to make, but that warm feeling will quickly turn cold if the property is a money-draining albatross. Start, at the very least, by estimating its initial cash flow—all the money that will come in for the first year minus all the money that will go out. If that number isn’t comfortably positive, reconsider.

 

2. Almost Doing Your Due Diligence

Most investors will check out the physical condition of the property. Most will also check out the rent data and verify at least some of the expenses. But have you actually read the leases? Are you going to get yourself locked into a dicey deal with below-market rents for a number of years; or maybe with a tenant’s right of first refusal if you want to sell, or even a tenant bail-out option?

 

3. Almost Doing Your Due Diligence, Part 2

OK, you did a good job vetting the property, its finances and its leases. So what did you forget? Maybe you forgot about the market. This property doesn’t live in a vacuum, so you absolutely need to be looking at the ecosystem around it.

What are other landlords getting for units in similar properties? What’s your competition for tenants? What is the prevailing cap rate for properties of this type? What’s the business climate—are companies moving in, moving out—is employment strong? As the anvil salesman says in The Music Man, “You gotta know the territory.”

 

4. Using the Wrong Lingo

Deals frequently unravel because the parties are not speaking the same language. Real estate investing, like other business professions, has a vocabulary all its own—terms whose meaning is agreed upon by those who buy, sell, broker, or finance property on a regular basis. I’ve seen things like “net operating income after debt service.” The rest of us probably call that “cash flow.” Who knew?

If you misuse standard terms, or if you use terms that don’t exist in nature, you’re either going to…

     … experience what I call the Cool Hand Luke Syndrome (“What we’ve got here is a failure to communicate”) and never reach a meeting of the minds, or

     …  paint yourself as someone who has never done a deal before, doesn’t know what he or she is talking about, and shouldn’t be taken seriously (and maybe should be taken advantage of).



5. Not Looking at the Deal from the Perspective of the Other Players

Whether you’re trying to buy, sell, finance, or raise equity, you have to recognize that your point of view isn’t the only one that matters. You need to put yourself in the shoes of the other interested parties.

Try to understand what are the sticking points, the potential deal killers from their perspective. Perhaps then you can come up with a solution. Do you have a property to sell, and does your potential buyer seem concerned about some vacant space? How about guaranteeing the rent for a period of time?

 

6. Can’t See the Forest… 

I notice this one with a lot with folks who are trying to vet their first income property. You can think of this as another “perspective” mistake—in this case you need to adopt the perspective not of a potential buyer but rather of someone who has already bought this property and now is trying to run it. It was nice that the seller or broker gave you a list of operating costs, and most of them were probably accurate, but is that list complete?

Go back to it and think about costs that nobody volunteered. Who gets rid of the snow, manicures the landscaping, vacuums the hallways, hauls the trash, services the HVAC? And often you’ll see no line item for property management (“Oh, I do that myself”), but you need to figure in an allowance for management even if no cash currently changes hands. An appraiser would routinely add management as an expense, and you should, too, because it will effect the estimate of value.

 

7. Thinking About Your Rental Property the Way You Think About Your Home

I usually ask my grad students how many own their own home. After a few proudly raise their hands, I tell them they’re at a disadvantage and need to try to forget what they think they know about real estate. Bummer.

The value of a personal residence is driven by economic factors—some national, most local. That’s why an appraiser will use the “comparable sales” approach when estimating the value of a home. If all your neighbors’ houses have sold for around $300k, then yours will probably sell for something like that as well.

But income-producing property is valued on its ability to produce net income. It’s not going to rise in value just because of the passage of time. Too many novice investors think their investment properties are going to “appreciate” on their own, over time, just because. Think again.

You can create value in an income property by enhancing its cash flow. Very few investment vehicles give you this power, but you have to understand how it works if you want to take advantage of this wealth-building potential.

8. Being Nearsighted  

Current-year data is important, but I hear a lot of investors who insist that they will focus only on the current income and expenses when evaluating a potential investment property. They say that this data is concrete and verifiable, and any prediction about future performance is just an exercise in fortune telling.

Yes, an appraiser is going to look at the current revenue, expenses, and market cap rate to estimate value. But remember this: The appraiser’s job is to estimate value at a point in time. You, on the other hand, are almost certainly investing for a period that extends beyond the current moment, and should be interested in how you believe this property will perform over a number of years.

So, in addition to looking at current performance, you should be making several projections as to future performance—best case, worst case, and in-between scenarios. This is a topic for more detailed discussion, so stay tuned for that.

 

9. Missing the Obvious in Your Analysis

You’ve taken my advice to heart and done both short-term and long-term projections of cash flows. Now, get your head out of your spreadsheet and use your common sense. Ask yourself if the figures in your analysis actually make sense. Do they look reasonable?

Is that cash flow way less than you expected, is your IRR in the stratosphere, is your mortgage payment merely a pittance? If so, then chances are you’ve either messed up a formula or a cell reference, or entered data incorrectly. When I look at my students’ work, it’s not uncommon to see that some of them have entered the total monthly rent, when they really needed the annual amount. Or they’ve put too many decimal places in the mortgage rate. Don’t assume, just because you used a spreadsheet, that the results are correct. Garbage in…

 

10. Forgetting that Real Property is a Real Business

After all that hard work—property search, due diligence, financial analysis, negotiation, financing, closing—you are finally the owner/operator of an investment property. Perhaps this is the first business you have ever run. You need to treat it like a business.

The top line of your P&L—revenue—needs to be the top line of your to-do list. Is someone not paying the rent, giving you excuses? Don’t let it slide. Your chances of collecting decrease exponentially with the passage of time.

Keeping records on sticky notes? Poor record-keeping can be your undoing, especially at tax time. Invest in some bookkeeping software, such as Quickbooks, rather than relying on a DIY spreadsheet. And once you’ve got it, use it.

Keep your tenant applications, leases and other documents in an organized file. If you really want to be good, scan them and store them on a removable hard drive.

In short, if you want your real estate investment business to succeed, then treat it like a serious business.

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These are the ten real estate investor mistakes I’ve seen most often, but maybe you’ve seen (or committed!) some of your own. I invite you to share your cautionary tales and add them to our list – let’s call it Everything Else that Real Estate Investors Should Avoid.

 

—-Frank Gallinelli

 

Your time and your investment capital are too valuable to risk on a do-it-yourself investment spreadsheet. For more than 30 years, RealData has provided the best and most reliable real estate investment software to help you make intelligent investment decisions and to create presentations you can confidently show to lenders, clients, and equity partners. Find out more at www.realdata.com.

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Copyright 2018,  Frank Gallinelli and RealData® Inc. All Rights Reserved

The information presented in this article represents the opinions of the author and does not necessarily reflect the opinions of RealData® Inc. The material contained in articles and blog posts that appear on realdata.com is provided as general information and is not intended to provide legal, tax or other professional advice or to substitute for proper professional advice and/or due diligence. We urge you to consult an attorney, CPA or other appropriate professional before taking any action in regard to matters discussed in any article or posting. The posting of any article and of any link back to the author and/or the author’s company does not constitute an endorsement or recommendation of the author’s products or services.

Now earn a digital certificate with my video course, “Introduction to Real Estate Investment Analysis”

Professional education is a great thing. And being able to broadcast news of your success makes it even more valuable.

That’s why I’m announcing a new benefit to students who enroll in my course, Introduction to Real Estate Investment Analysis. I’m now awarding a digital Certificate of Achievement and badge to students who successfully complete the course.

Here are some questions you probably want to ask:

What does it cost? For my students: nothing. RealData is picking up the cost of issuing and hosting the certificate.

What do you mean by “digital certificate?” Your certificate will be hosted by Accredible.com, an industry-leading credentialing platform. As you’ll see below, it’s designed so you can share it easily.

Does that mean I don’t get a physical certificate to hang on my office wall? No, you also get a pdf version you can print.

What’s so special about this digitally hosted certificate?  So glad you asked. Here are a few things you couldn’t do with a traditional certificate:

  • You receive a unique url for your Certificate, so you can share it with employers, clients, industry groups, just about anyone.
  • You can share it on any of your social media networks with just a click on a toolbar.

 Your personal certificate page includes a dashboard, as shown at the left. From there you can…

  • Add it to your LinkedIn profile
  • Add it to your email signature
  • Get the code to embed it in your website
  • Email it to anyone
  • Download it as a PDF
  • Download a badge image, which you can attach to your email signature, put on business cards, etc.
  • Add “evidence” to your certificate to increase your credibility — examples of your work, videos about yourself, links to projects you’ve been involved with – and even more

How do I obtain my certificate?Within a few days after you complete the work to earn your certificate, we’ll send you an email with instructions to access it. If you believe you’ve completed the requirements but haven’t heard from us, please contact us at mailto:education@realdata.com

Terms of Use: Please review our common-sense Terms of Use

I believe our online video course provides a solid educational opportunity for those who want to learn about real estate investment and development. I hope this digital certificate will recognize your efforts and will benefit you for devoting the time and effort to pursue that education. I look forward to contacting you when you complete your coursework!

Frank Gallinelli

New REIA v18 Releases for the New Year – Mac and Windows

With the new year comes the release of REIA version 18 for Mac. This release has all the same features, calculations and reports that are found in the Windows release. Like all of our Mac  products, it will run under Mac Excel/Office 2011 only. We continue to wait for Microsoft to make fixes and improvements to Excel 2016 so that our software will run correctly in that version. REIA v18 on the Mac runs on Excel 2011, Excel 2016 and Excel/Office 365.

Also available for immediate download is a maintenance update for REIA v18 Windows. This update fixes minor issues in the Cover Sheet and Cash Flow / Resale Assumptions reports. Customers who own a license of the software can download the latest build 1.07 from either the Welcome worksheet of their product or via their customer account at realdata.com

Keep track of all latest releases on our builds page.

 

New Lease Renewal Assumptions feature for REIA Professional

Making assumptions and entering data about commercial lease revenue — especially rollovers — was often a tedious undertaking. Until now.

Enter our latest game changer: REIA Professional’s Lease Rollover Assumptions

What is it?

Our new Lease Rollover Assumptions feature (LRA) is a way for you to store sets of parameters about different commercial lease rollover scenarios, parameters which you can use over and over when entering tenant information in REIA Professional. What is the probability that a current tenant will renew? How long do you think the space will be vacant if a tenant chooses not to renew?

Build your assumptions sets, add your tenants, and apply the LRAs. Done.

You rely on our products to crunch the numbers quickly and accurately so you can make the best and most profitable commercial investment decisions. LRA brings you a whole new level of power and speed.

How it works

First, create a set of assumptions on the new LRA worksheet.  Enter values for months vacant, rollover probability, new and market rent, etc.

lra4

Then apply those assumptions to a tenant just by selecting the option on the Commercial Income worksheet:

lra5

How to get it

If you already own a license of REIA Professional version 18, then you just need to download the latest build from your customer account at realdata.com

If you have a previous version, consider upgrading.  Upgrade costs can be found here.

Learn More

We have a knowledgebase article which walks you through the setup and configuration of the LRA feature.