In this high technology world, there is powerful spreadsheet software that dramatically increases the speed at which real estate investors are able to analyze investment opportunities. Of course, investors able to perform faster and more in-depth analysis are able to find the best investment opportunities.
I'm not going to make a recommendation for particular software. My goal here is providing you with information so that you know what to look for to make an educated decision on your own. Good real estate analysis software performs a wide gamut of calculations instantly. These range from simple calculations like cap rate, cash flow, and mortgage costs to the more advanced calculations for concepts including tax sheltering, financial sheet analysis, time value of money, and internal rate of return.
For rehabbers the software must have a section to estimate material and labor costs. It should also highlight missing and inaccurate data entry. Good software will highlight data that doesn't appear to be consistent with the rest of the data. For instance, a 100-unit apartment building with only $4,000 in monthly rent collections.
The software should make quality presentations possible to potential lenders or potential money partners, and others involved with your real estate projects. You should be able to enter multiple variables at the same time to receive instant up dates to the analysis.
The software needs to come up with strong buy or don't buy recommendations. Many use a sliding scale from 1 - 10 or 1 - 100. Good software makes recommendations strongly indicating one end of the scale or the other. Software that consistently indicates a value towards the middle isn't performing an analysis that helps you.
Real estate analysis software is complex. In addition to performing analysis of potential investments, it should monitor your existing portfolio. Each time you enter cash flow and expense data the software must indicate how well the property is performing financially. You should be able to identify poor performers easily so that you can sell them out of your portfolio. An analysis of the best performers should reveal common characteristics and features among them. You use this information to find other big cash producing properties.
Additionally, the software needs to highlight areas where expenses can be reduced or eliminated. One of the functions of the software is maximizing the profit of every property in your portfolio.
Top quality real estate analysis software does more than let you invest with confidence. It gives you a big edge over competitors and makes you stand out as a professional in front of investors and project partners. If you have staff manually performing the analysis, it frees up their time to focus on your core business. If you are doing the analysis yourself, it will free up your time for much better uses whether that is growing your business or spending more leisure time with your family.
Finally, the software needs to calculate complex formulas to come up with dependable recommendations but it should NOT be difficult to learn to use. Training should come in a variety of media. A basic instruction guide is essential along with videos demonstrating each feature of the software and how results are interpreted. Embedded in the software should be popup windows explaining the information being asked for or the information being presented. You need real time support when you have questions or problems. Service comes with annual up dates keeping the software current with tax rates and changes in regulations.
You may be thinking all of that is a tall order to fill. It's not, there are multiple brands of high quality real estate analysis software that will bring an improvement in your work life and increase your bottom line.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for seven years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. In the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.