Rental property investment software help

Properties Screen

Scenario - a descriptive word or phrase used to identify a particular property valuation scenario. For example, "HighInt" for a high interest rate scenario.

Description - a brief description of the property being analyzed. For example, 4 bedroom, 2 bath condo.

Address - property street address.

Unit - unit number. For example, #3, Unit 3 or Apt 3.

City - city or town where the property is located.

State - state where the property is located.

Zip Code - property's zip code.

Basic Data Screen

Acquisition Date - the date that the property was purchased.

Purchase Price - the amount you paid for the property.

Current Value - the amount of money the property would sell for today. It can be the purchase price, an appraised value, a recent sale price of a comparable property or any estimate of current market value.

Land Value - the actual value of the land, not including the house or other improvements on the land. An estimate of land value can usually be obtained from an appraisal, the tax assessor's office or from a recent sale of a comparable property. It is used in calculating the depreciation on the property.

Square Footage - the living area of the property. An estimate of square footage can usually be obtained from an appraisal or the tax assessor's office. It is used in the "Fair Market Vale Per Square Foot" calculation. This is a optional entry but if it is omitted, then the "Fair Market Vale Per Square Foot" calculation will equal zero in all years of the forecast.

Property Type - the type of property being analyzed. Either residential or commercial. It is used in calculating the depreciation on the property.

Initial Rental Date - the date that the property is first rented.

Acquisition Costs Screen

Cost - one-time expenses incurred in connection with the purchase of the property. RealVal is programmed to handle a variety of costs that can be chosen from the dropdown menu. The other category can be used include costs that are not listed.

Amount - the amount of the acquisition cost.

Assumptions Screen

Current Monthly Rent - the amount of monthly rent currently being charged.

Rent Increase - the percentage increase or decrease used to project future monthly rent. The percentage should be entered as a decimal. For example 6.5% should be entered as .065.

Incr Rent Every (Yrs) - the frequency that the Rent Increase is applied to the Current Monthly Rent. For example, if the Rent Increase is 3.5% and Incr Rent Every (Yrs) is 3 Years, then the monthly rent will be increased by 3.5% every 3 years.

Other Mth Income - the amount of additional income generated by the property. For example, parking fees or fees from laundry facilities.

Other Mth Inc Incr - the percentage increase or decrease used to project Other Mth Income. The percentage should be entered as a decimal. For example 3.5% should be entered as .035.

Incr Oth Inc Every (Yrs) - the frequency that the Other Mth Inc Incr rate is applied to the Other Mth Income. For example, if the Other Mth Inc Incr rate is 3.5% and Incr Oth Inc Every (Yrs) is 3 Years, then Other Mth Income will be increased by 3.5% every 3 years.

Vacancy Rate - the percentage of a year that the property is expected to be vacant. It is used to calculate rental losses. For example, a Vacancy Rate of 8.33% means that you expect the property to be vacant one month per year. Hence, a month of rental income is lost each year due to vacancy. The percentage should be entered as a decimal. For example 8.33% should be entered as .0833.

Management Fees - fees charged by an individual or company to manage the day-to-day operations of a rental property. This fee is a percentage of the monthly rent. The percentage should be entered as a decimal. For example 10% should be entered as .10.

MIRR Re-invest Rate - the interest rate used to estimate the rate of return on the property's re-invested annual cash flow. The Internal Rate of Return (IRR) calculation assumes that the property's annual cash flow is re-invested at same rate of return generated by the IRR calculation. In most cases you will not be able to re-invest the property's cash flow at this rate. Hence, the IRR calculation can overstate the property's rate of return. The Modified Internal Rate of Return (MIRR) generally produces a more accurate estimate of the property's rate of return. This rate is usually a treasury or passbook savings rate. The re-investment rate should be entered as a decimal. For example 5% should be entered as .05.

NPV Discount Rate - the interest rate used to determine the Net Present Value of the future cash flow generated by the property. The NPV calculation discounts the property's future cash flow back to the present to estimate the desirability of the investment. If the NPV of a the investment is positive, then it should be accepted. However, if the NPV is negative, the investment should probably be rejected because cash flow will also be negative. The larger the net present value, the better the investment. The discount rate should be entered as a decimal. For example 9% should be entered as .09.

Property Apprec Incr - the annual percentage increase or decrease in the property's value. It is used to project Current Value on the Basic Data screen. The percentage should be entered as a decimal. For example 4% should be entered as .04.

Apprec Prop Every (Yrs) - the frequency that the Property Apprec Incr rate is applied in the projection of the property's value. For example, if the Property Apprec Incr rate is 4.0% and Apprec Prop Every (Yrs) is 2 Years, then the property's value will be increased by 4.0% every 2 years.

Brokerage Comm - the percentage of the sales price that an investor will have to pay a real estate broker to handle the sale of the property. The percentage should be entered as a decimal. For example 6% should be entered as .06.

Federal Tax Rate - marginal U.S. federal tax rate or any other applicable tax rate. The rate should be entered as a decimal. For example, 28% should be entered as .28.

Fed Cap Gains Tax Rate - U.S. federal capital gains tax rate or any other applicable tax rate. The rate should be entered as a decimal. For example, 15% should be entered as .15.

Sec 1250 Tax Rate - U.S. tax rate charged on the portion of a capital gain that is attributable to recognized depreciation. The rate should be entered as a decimal. For example, 25% should be entered as .25.

State Tax Rate - U.S. state tax rate or any other applicable tax rate. The rate should be entered as a decimal. For example, 6% should be entered as .06.

St Cap Gains Tax Rate - U.S. state capital gains tax rate or any other applicable tax rate. The rate should be entered as a decimal. For example, 6% should be entered as .06.

Passive Loss Treatment - passive activity loss rules were enacted to prevent individuals from offsetting passive activity losses against other taxable income. In general, passive activity losses can only offset passive activity income. If your real estate rentals are a passive activity and you actively participate in their operation, then you can generally offset a passive activity loss of up to $25,000 against your non passive income. The $25,000 allowance is gradually phased-out if your modified adjusted gross income is between $100,000 and $150,000. If you select Yes in the dropdown box, then RealVal assumes you do not have any passive income and all losses are recognized when the property is sold. If you select No in the dropdown box, then RealVal assumes you have other passive income and all losses are recognized in the year in which they occur.

Expenses Screen

Expense - type of expense to be included in the forecast.

Amount - the current cost of the expense.

Expense Increase - the percentage increase or decrease used to project the expense. The percentage should be entered as a decimal. For example, 6.5% should be entered as .065.

Incr Exp Every (Yrs) - the frequency that the Expense Increase is applied to the Expense Amount. For example, if the Expense Increase is 3.5% and Incr Exp Every (Yrs) is 3 Years, then the Expense Amount will be increased by 3.5% every 3 years.

Include Every (Yrs) - the frequency, in years, that the expense appears in the forecast. For example, if you set Include Every (Yrs) to 6 years, then the expense will first appear in the Exp Begin Year and every 6th year until the earlier of the Exp End Year or the end of the forecast. Hence, if the Exp Begin Year equals 2007 and the Exp End Year equals 2021, then the expense will show up in years 2007, 2013 and 2020.

Exp Begin Year - the first year that the expense appears in the forecast.

Exp End Year - the last year that the expense appears in the forecast. If the Exp End Year is later than the end of the 20 year forecast period, then the expense will end in final year of the forecast.

Improvements Screen

Improvement - type of improvement to be included in the forecast.

Original Cost - the original cost of the improvement when it was added to the property.

Current Cost - the cost of the improvement if it was added to the property today. For example, remodeling the master bathroom in 2001 cost $20,000. Now the same project would cost $25,000. In this scenario Original Cost should equal $20,000 and Current Cost should equal $25,000. If the improvement is new, then the Original Cost and Current Cost should be equal.

Yr Placed in Service - year that the improvement was added to the property. For example, if a new air conditioner was installed in 2004, then Yr Placed in Service should equal 2004. The Yr Placed in Service can also equal a future year in the forecast. For instance, if you know that you are going to remodel the kitchen in 2010, then set the Yr Placed in Service to 2010.

Expected Life (Yrs) - the number of years the improvement is expected to last. For example, you install a new air conditioner in 2004 and expect it to last for 15 years. In this case, you would set the Yr Placed in Service to 2004 and Expected Life (Yrs) to 15. RealVal will project the future cost of replacing this air conditioner and the cost will be reflected in 2019.

Cost Increase - the percentage increase used to project the cost of future improvements. The percentage should be entered as a decimal. For example, 4.5% should be entered as .045.

Incr Cost Every (Yrs) - the frequency that the Cost Increase is applied to the Current Cost of the improvement. For example, if the Cost Increase is 4.5% and Incr Cost Every (Yrs) is 1 Year, then the Current Cost will be increased by 4.5% every year.

Increases Prop Value - if the value of the improvement should be included in the property appreciation projection, then select "Yes" from the dropdown box. For example, a bedroom addition would increase the value of a property whereas replacing an air conditioner would not.

Appliances Screen

Appliance - type of appliance to be included in the forecast.

Original Cost - the original cost of the appliance when it was added to the property.

Current Cost - the cost of the appliance if it was added to the property today. For example, a new stove in 2003 cost $500. Now the stove would cost $700. In this scenario Original Cost should equal $500 and Current Cost should equal $700. If the appliance is new, then the Original Cost and Current Cost should be equal.

Yr Placed in Service - year that the appliance was added to the property. For example, if a new dish washer was installed in 2005, then Yr Placed in Service should equal 2005. The Yr Placed in Service can also equal a future year in the forecast. For instance, if you know that you are going to install a dish washer in 2009, then set the Yr Placed in Service to 2009.

Expected Life (Yrs) - the number of years the appliance is expected to last. For example, you install a new oven in 2006 and expect it to last for 10 years. In this case, you would set the Yr Placed in Service to 2006 and Expected Life (Yrs) to 10. RealVal will project the future cost of replacing this oven and the cost will be reflected in 2016.

Cost Increase - the percentage increase used to project the cost of replacing the appliance in the future. The percentage should be entered as a decimal. For example, 4.5% should be entered as .045.

Incr Cost Every (Yrs) - the frequency that the Cost Increase is applied to the Current Cost of the appliance. For example, if the Cost Increase is 4.5% and Incr Cost Every (Yrs) is 2 Years, then the Current Cost will be increased by 4.5% every two years.

Financing Screen

Mortgage Type - type of mortgage to be included in the forecast. Multiple mortgages can be entered on a property.

Down Payment - the amount of money an investor is required to put down on the property in order to obtain financing. It does not include closing costs, discount points or any other costs associated with obtaining the loan. These costs should be entered on the Acquisition Costs screen or included in the Mortgage Balance if they are financed.

Mortgage Balance - the initial principal amount of the mortgage plus any additional amounts included in the mortgage. For example, you purchase a property for $200,000, make a down payment of $20,000, leaving $180,000 to be financed. There will be $4,000 of closing costs associated with this loan. If you pay these costs up front, then the $4,000 should be entered on the Acquisition Costs screen. If you decide to finance these costs, then the $4,000 should be included in the Mortgage Balance. Hence, the Mortgage Balance would be $184,000, instead of $180,000.

Current Interest Rate - the interest rate in effect at the Calculation Start Date. For a fixed rate mortgage, the Current Interest Rate is the rate in effect at the inception of the loan. Hence it does not change. For an adjustable rate mortgage (ARM) or an interest only mortgage, the Current Interest Rate is the interest rate in effect at the Calculation Start Date.

Closing Date - the date of the loan closing. It cannot occur prior to the Acquisition Date shown on the Basic Data screen.

Next Int Rate Adj Date - the date of the interest rate adjustment that occurs immediately after the Calculation Start Date. For example, if the Calculation Start Date is 6/1/2007 and the next interest rate adjustment is scheduled to occur on March 1, 2008, then the Next Int Rate Adj Date equals 3/1/2008. This only applies to adjustable rate or interest only mortgages. Leave this field blank for fixed rate loans.

Int Rate Adj Per Year - the number of times the interest rate changes in a given year. For example, for a 3 year ARM, the interest rate is fixed for the first 3 years and then it adjusts once every year after the initial 3 year period has expired. In this example the Int Rate Adj Per Year equals 1. This only applies to adjustable rate or interest only mortgages. Leave this field blank for fixed rate loans.

Rate Change - this field is used in connection with adjustable rate and interest-only mortgages. It represents the amount the Current Interest Rate will increase or decrease when it is adjusted. For example, on a 1 year ARM, assume you have a Current Interest Rate of 4.00% and a Rate Change of 2.00%. In the first year, the Interest Rate will be 4.00%; in the second year it will increase by 2.00% to 6.00%. In the third year, it will be 8.00% (6.00% + 2.00%), etc.

Max Rate - this is a rate cap that is used in conjunction with adjustable rate and interest-only mortgages. It represents the maximum interest rate that will be charged on the loan. For example, on a 1 year ARM, assume you have a Current Interest Rate of 4.00%, a Rate Change of 2.00%, and a Max Rate of 7.00%. In the first year, the Interest Rate will be 4.00%, in the second year, it will be 6.00% (4.00% + 2.00%), in the third year, it will be 7.00% (6.00% + 2.00% = 8.00%, but the maximum is 7.00%), in the fourth year it will be 7.00% (8.00% + 2.00% = 10.00%, but the maximum is 7.00%), etc.

Min Rate - this is a rate floor that is used in conjunction with adjustable rate and interest-only mortgages. It represents the minimum Interest Rate that will be charged on the loan. For example, on a 1 year ARM, assume you have a Current Interest Rate of 4.00%, a Rate Change of -1.00% and a Min Rate of 3.00%. In the first year, the interest rate will be 4.00%, in the second year, it will be 3.00% (4.00% - 1.00%), in the third year, it will be 3.00% (3.00% - 1.00% = 2.00%, but the minimum is 3.00%), in the fourth year it will be 3.00% (2.00% - 1.00% = 1.00%, but the minimum is 3.00%), etc.

Calculation Screen

Calc Start Date - the date that the forecast begins.

Cacahuete Properties, LLC
4880 Lower Roswell Road, Suite 165-408
Marietta, GA 30068
404.483.4636