Why bother with financial analysis?
You’ve been on the hunt for an investment property, and have finally found the right now. It looks right, and the deal ’smells’ right to you. The location seems like a sure bet.
So why bother spending all that time crunching the numbers? There are a few reasons, actually:
- The analysis process forces you to think things through, and reduces the risks that you’ll overlook some key factors. It forces you to remove yourself from the emotional ‘heat of the deal,’ where you just might rush into something that ’seemed like a good idea at the time.’
- Discount cash flow analysis gives you a number projecting how much you can expect to pull out of an investment. You can quantify ‘great deal’ in dollars and cents.
- Detailed financial projections are the hallmark of a professional, and my aid you in attracting loans and financing for your deal.
- Forcing yourself to generate best- and worst-case scenarios will create a range of projected results. The one thing that you know for sure is– you can’t foresee the future. However, you can attempt to determine the maximum and minimum amounts you stand to gain or lose, as well as the most-likely amounts. This is critical, since you should never pursue an investment where you aren’t comfortable with the risks. Nor should you pursue investments where the best-case scenario doesn’t meet your minimum return.
Best of all, financial analysis doesn’t even need to take up much of your time. The Real Estate Genius investment property calculator runs the numbers instantly– you just need to gather the facts, and plug in your assumptions.
Don’t leap before you look. Run the numbers and be prepared.
