PROPERTY REALITY
THE HOME OF RESIDENTIAL PROPERTY CALCULATIONS
The acquisition of a residential property is a major investment decision simply due to the capital that is required when purchasing a property and the financial obligation that goes with it. It is therefore obvious that regardless of whether a primary residence or a buy to let investment property is acquired, the investor needs to understand the fundamentals of the transaction and the variables that could have a significant influence on the success of the investment. After acquiring a property, it is equally important to be able to measure the effect that movements in key variables have on the investment return that is likely to be achieved. Proper financial planning is also only possible if the property owner bases financial decisions on information that includes everything he needs to know and is accurate.
Residential property investments have always been known as solid long term investments that are associated with a relatively low level of financial risk. Even though this perception is generally accurate because residential properties are not usually affected by significant fluctuations in market values, the recent financial crisis in the United States and Europe is a very good example of what happens when these investments are turned into high risk investments through circumstances that are entirely out of the individual investor's control. It is therefore becoming increasingly important for investors and home owners to measure the effect that changes in key residential property variables like interest rates and house price growth rates have on their investments.
The following categories of property variables have a significant influence on investment return:
All of these variables need to be taken into account when calculating the investment return that is likely to be achieved from a residential property investment. If one or more of these variables are not included in the calculation of investment return, the investment return that is calculated is guaranteed to be inaccurate and the property investor may run the risk making the incorrect investment decision. Prudent property investment decisions can only be made if the property investor is able to compile a comprehensive, accurate property investment forecast before acquiring a residential property and to analyze the actual investment return that is achieved on an ongoing basis. It is equally important that the correct property investment return calculation methodology is applied in the calculation of the forecasted and actual investment return.
Most home owners and property investors don't have the financial skills in order to compile their own comprehensive and accurate investment return calculations but there are quite a few residential property software or calculation solutions that can be purchased for this purpose. When compared to the cost and financial obligations that are involved in acquiring a residential property, the cost of a comprehensive property calculation solution is minimal. It is also very difficult to put a value to the lifelong benefits that can be derived from an accurate and comprehensive property calculation solution and probably even harder to quantify the cost of not having the information available when making investment decisions!
In terms of compiling a comprehensive property investment return forecast and measuring the actual investment return against the initial forecast, we recommend that property investors acquire a property calculation solution that includes calculations of the internal rate of return (IRR) and annual return on equity because we believe that these two calculations are the only two measurements that enable property investors to measure investment return accurately on both a cumulative and annual basis.
Our unique range of residential property spreadsheets includes a comprehensive property forecast template and primary residence and buy to let property investment templates which enable users to record property transactions and to compile a comprehensive analysis of investment return on both a cumulative and annual basis. The property investment return analysis includes calculations of the internal rate of return (IRR), annual return on equity, rental yields, net present value (NPV) and the average annual capital growth rates. In addition, our property spreadsheets also include property income tax, capital gains tax, bond statement, bond amortization and transfer & bond cost templates. These are the most comprehensive and accurate residential property calculation solutions that you will ever find!