Very simple and easy. Completely understood instructions and the task in 2 hours of watching this video with no prior knowledge on writing out a pro forma. I was able to easily write out a few for my investors. Trust me, I was conservative and not aggressive doing assumptions. Thanks a lot ! 7 years later this video is helping me make tons of cash.
Spencer, thank you for your detailed model and tutorial. I am curious, how do you incorporate a refinance into the model? Also, how would you incorporate an annual increase of rent due to inflation? Thanks.
Thanks for such a great tool. I've been trying to find a template that I can tweak for my own purposes, and this would work if I could change/add certain fields to the spreadsheet. How would I be able to tweak it for my purposes to allow for a buy and hold that allows for a 10-20 year hold? Is there a reason you have a hard stop at 60 months, and can I lift that? Also, in this sort of model I would like to factor an annual increase (by percentage) for future rent prices, expenses, property taxes (which are fixed here in California at 2% per year), and future sales price based on annual appreciation. If I could accomplish those in this spreadsheet it would work very well for me. Then, all I would have to find is an additional spreadsheet that lets me compare these outputs to a 1031 Exchange reinvestment at some point during the ownership period.
HI, i have been getting the following message when trying to visit your website: The site is experiencing technical difficulties. Please help Spencer!! Can someone email me the excel doc?
Hi Spencer, great info, there is so much to learn, question how do you calculate the percentage for the closing cost? is it based on the property price or the loan amount?
In the U.S. a very general rule of thumb is 1-2% of the purchase price on the buying side and 6-7% of the selling price on the sell side. Of course, the lender will typically charge it's origination fee as a percentage of loan amount, but there are other fees included so it makes sense to forecast using a percentage of total price.
Hi Spencer, thanks so much for this video and the model. Quick question, how would you incorporate soft costs like A&E, Construction Admin., Consultants, and/or Loan Costs?
Hi Evan, Under the Construction Budget tab you'll find cells titled [New Category]. You could drop soft costs in as other categories there. In terms of loan costs, I'd just wrap that into closing cost % (Assumptions tab cell F25). Thanks for watching!
I wanted to add something else, doing my numbers using your model, which by the way thank you it is a great tool for my investment, on my Cash on Cash return I get a -2.94, looking at this did I make a bad investment?
oscar osorio Hi Oscar, a negative cash on cash return means your net cash flow after financing in that period is negative. This typically happens when a) the investor leveraged the property to the point that debt service > cash flow from operations, b) the investor has sufficient capital to cover the shortfall years, and c) the investor expects the property's value to grow such that the appreciation makes up for the drag on total returns from the negative cash flow years.
Hi Spencer your model talks about buy and hold for the most 60 months, but what if I don't want to sell? Does that make a bad investment and how do my calculations change?
Hi Oscar, thanks for watching. Everyone's investment thesis is different. In residential single-family investments, some buy to flip. Others buy to hold. The length of the hold varies and can depend on a host of factors including personal preference, investment goals, market factors, etc. The primary reason for performing financial analysis at the outset is to compare one investment against another. The tool I demonstrate here uses a discounted cash flow model to forecast various return metrics, including the internal rate of return (IRR), of the proposed investment. To properly calculate the IRR, there needs to be a "residual value" included or the value at which you could sell the asset at some future date. Thus, every investment analysis period has a finite life - in this case the max being 60 months. With that said, hold period for modeling purposes does not necessarily need to match what happens in practice, in fact it rarely does! So my suggestion for you if you don't intend to sell, is to look at the investment as if it were a 60 month hold but understanding in reality you'll likely hold it for longer. Just be sure that each investment you're analyzing uses the same hold period to get a proper comparison.
Spencer, I don't see a PM line item in the cash flow - was this done deliberately or was it included some place else? Look forward to your reply - Thanks!
+Zachary Hampson - Thanks for noticing that! That was definitely an oversight. I'd included a property management fee % assumption, but had not used it on the cash flow tab. I've made the correction, and uploaded a new version of the model with the addition. If you see anything else, please let me know.
Very simple and easy. Completely understood instructions and the task in 2 hours of watching this video with no prior knowledge on writing out a pro forma. I was able to easily write out a few for my investors. Trust me, I was conservative and not aggressive doing assumptions. Thanks a lot ! 7 years later this video is helping me make tons of cash.
Thank you Spencer for your help, your property analysis is one of the best I've watched
Spencer, thank you for your detailed model and tutorial. I am curious, how do you incorporate a refinance into the model? Also, how would you incorporate an annual increase of rent due to inflation? Thanks.
Thanks for such a great tool. I've been trying to find a template that I can tweak for my own purposes, and this would work if I could change/add certain fields to the spreadsheet.
How would I be able to tweak it for my purposes to allow for a buy and hold that allows for a 10-20 year hold? Is there a reason you have a hard stop at 60 months, and can I lift that? Also, in this sort of model I would like to factor an annual increase (by percentage) for future rent prices, expenses, property taxes (which are fixed here in California at 2% per year), and future sales price based on annual appreciation. If I could accomplish those in this spreadsheet it would work very well for me. Then, all I would have to find is an additional spreadsheet that lets me compare these outputs to a 1031 Exchange reinvestment at some point during the ownership period.
It wont let me download and i dont see any link in the comments. Will you give me a link please?
Hi Spencer! Need help with the same.
HI, i have been getting the following message when trying to visit your website: The site is experiencing technical difficulties.
Please help Spencer!! Can someone email me the excel doc?
Hi Spencer, great info, there is so much to learn, question how do you calculate the percentage for the closing cost? is it based on the property price or the loan amount?
In the U.S. a very general rule of thumb is 1-2% of the purchase price on the buying side and 6-7% of the selling price on the sell side. Of course, the lender will typically charge it's origination fee as a percentage of loan amount, but there are other fees included so it makes sense to forecast using a percentage of total price.
Hi Spencer, thanks so much for this video and the model. Quick question, how would you incorporate soft costs like A&E, Construction Admin., Consultants, and/or Loan Costs?
Hi Evan, Under the Construction Budget tab you'll find cells titled [New Category]. You could drop soft costs in as other categories there. In terms of loan costs, I'd just wrap that into closing cost % (Assumptions tab cell F25). Thanks for watching!
I wanted to add something else, doing my numbers using your model, which by the way thank you it is a great tool for my investment, on my Cash on Cash return I get a -2.94, looking at this did I make a bad investment?
oscar osorio Hi Oscar, a negative cash on cash return means your net cash flow after financing in that period is negative. This typically happens when a) the investor leveraged the property to the point that debt service > cash flow from operations, b) the investor has sufficient capital to cover the shortfall years, and c) the investor expects the property's value to grow such that the appreciation makes up for the drag on total returns from the negative cash flow years.
Hi Spencer your model talks about buy and hold for the most 60 months, but what if I don't want to sell? Does that make a bad investment and how do my calculations change?
Hi Oscar, thanks for watching. Everyone's investment thesis is different. In residential single-family investments, some buy to flip. Others buy to hold. The length of the hold varies and can depend on a host of factors including personal preference, investment goals, market factors, etc. The primary reason for performing financial analysis at the outset is to compare one investment against another.
The tool I demonstrate here uses a discounted cash flow model to forecast various return metrics, including the internal rate of return (IRR), of the proposed investment. To properly calculate the IRR, there needs to be a "residual value" included or the value at which you could sell the asset at some future date. Thus, every investment analysis period has a finite life - in this case the max being 60 months.
With that said, hold period for modeling purposes does not necessarily need to match what happens in practice, in fact it rarely does! So my suggestion for you if you don't intend to sell, is to look at the investment as if it were a 60 month hold but understanding in reality you'll likely hold it for longer. Just be sure that each investment you're analyzing uses the same hold period to get a proper comparison.
Spencer, I don't see a PM line item in the cash flow - was this done deliberately or was it included some place else?
Look forward to your reply - Thanks!
+Zachary Hampson - Thanks for noticing that! That was definitely an oversight. I'd included a property management fee % assumption, but had not used it on the cash flow tab. I've made the correction, and uploaded a new version of the model with the addition. If you see anything else, please let me know.
Thanks! +Spencer Burton - The model is an amazing tool and thank you for you for amending it.