It's in the genes

Although I never pursued anything resembling the craft of programming, I find myself really interested in it. I'm actually a bit obsessive compulsive over excel financial designs and I'm starting to learn VBA and Macros on my own. Why? Well, it would help in any investment situation.

Over the past week, I've been developing a single-family home investment tool in excel. It's beyond all the shallow conclusions that Robert Kiyosaki and Dolf de Roos proclaim in their get rich quick books. My intention was to apply commercial investment methodologies and apply them to the residential market.

Beginner Investor Scope:

Inputs Considered--

1. Home Price: $100,000
2. Rental Rate: $1,000/mo
   

Conclusions Drawn--

10% return! Good investment!

Intermediate investor:

Inputs Considered--

1. All the Previous
   
2. Insurance:
3. Mortgage:
4. Maintenance:
5. Tax:
6. HOA(If any):
7. Property Management:
   

Conclusions look like this--

Rent: $ 1150
6% IO Mortgage: $ (424)
Property Tax: $ (251)
Hazard Ins: $ (45)
Prop Mgr: $ (92)
CASH FLOW: $337/month!!

Advanced Investor Scope (not inclusive of everything though):

1. All the previous
   
2. Vacancy/Credit Loss
3. Sensitivity Ratios
4. Positive or Negative Gearing (Very important!)
   
5. Debt Service Cover
6. Net Present Value/Discounted Cashflow (to account for time value of money, cost of equity, and inflation, etc)
7. Internal Rate of Return (to understand the true returns for buy-hold-sell investment strategy)
8. Cash on Cash Return
9. Leveraged versus no leveraged return

Conclusions:

1. If positively leveraged then adding more debt will increase returns, if negatively leveraged than adding more debt will decrease returns. What's the threshold?
2. With the debt service cover ratios you can understand the upper limit loans you can take out on a property and this includes unrealized capital appreciation
3. NPV/DCF permit you to see how much your returns are really worth X number of years down the road.
4. IRR allows you to see how much your returns are which includes principal paid off (often not calculated by investors)
5. True yields.

Since my spreadsheet is still in draft form, I'm offering it free to anybody who wants to see how their current home would perform on the market or how their current investment is performing. My cashflow-IRR tab still needs to include transaction fees and needs some aesthetic improvements, but it'll give you a preliminary idea of a buy-hold 5 years-sell return.

Excel Google Document is HERE.

I welcome feedback as I want to build this up to be as beginner-friendly as possible. I don't like it when people throw out terms that nobody understands to boost their own ego. (Note: in my original excel sheet, I have definitions embedded in each category, but google docs has deleted that... boo!)