Analysis Tools: Comparing, Validating and Valuing Properties

Analysis Tools:  Comparing, Validating and Valuing Properties

It’s important for an investor to keep in mind the risk/return tradeoff for real estate compared to other assets such as stocks.  Although stocks have a historically higher average rate of return, this comes with more volatility and less control and transparency.  You need a strong grasp in accounting just to get through a company’s balance sheet and even then, you have to trust that the financials are accurate.  Real estate will never plummet to zero, it’s higher on the “basic human need” chart (food, shelter, water) and it’s much easier to analyze on a basic level, just find out if your income exceeds your expenses.

Given those basic differences, it’s a good idea to have the tools necessary to analyze your real estate investments to determine the pre-tax rate of return relative to other investments.  One of the tools we use is a proprietary spreadsheet, called our Investment Analysis Tool, that takes into account the income, expenses, and investors’s tax bracket to come up with an all-cash and mortgage comparison for the investment.  This helps the investor see the difference that a leveraged investment can provide.

Another spreadsheet we use, is called our Investment Performance Summary.  This 5-page spreadsheet helps an investor determine an appropriate exit strategy by considering the holding period, average market appreciate rates, acquisition data and operating expenses for the investment.

The last tool we use is probably the one we use first in the process.  It is the Austin and Greater Washington D.C. MLS Databases.  We are able to leverage technology to help our investors pinpoint exacting criteria for their next investment home and be the first buyers to see a new home that hits the market using real-time alerts.  Using historical sold data, we can develop a negotiation strategy and have a better understanding of how supply and demand principles may be impacting the neighborhood we are buying in.

With a war-proven background in Military Intelligence, Edward, the Broker/Owner of Mars Hill Realty, has been able to take his analytical abilities and these tools to help his clients make smart investment choices. You’ll never know what the other buyer or seller is willing to sell that house for, but with due diligence and a comprehensive plan, we will make sure you have the advantage at every real estate negotiation.  You won”t be able to find this on Zillow, tax records or from just any licensed agent. With our unique three-fold analysis approach, we give our clients all the leverage they need to confidently make an offer on their next investment property.