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Using Excel Spreadsheets Quickly estimating the value of a rental property David Barr, Realtor, GRI, EMS 763-463-7511, [email protected] Keller Williams Classic Realty NW 12/25/2021

Deal Or No Deal Using Excel Spreadsheets

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The basics of cash flow analysis for real estate investing.

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Page 1: Deal Or No Deal   Using Excel Spreadsheets

Using Excel Spreadsheets

Quickly estimating the value of a rental property

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 2: Deal Or No Deal   Using Excel Spreadsheets

Presentation Outline

• Review the basics • View some examples• Play with variables• Some handy hints and advice• Questions

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 3: Deal Or No Deal   Using Excel Spreadsheets

It is in the numbers!• There are lots of methods and

techniques for evaluating real estate investments– Calculators– Worksheets– Computer programs

• I will show you a simple one page Excel spreadsheet to do it fast and easy

• Focus on 1-4 unit rental buildings – 1st yr

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 4: Deal Or No Deal   Using Excel Spreadsheets

Why do it?

• If a property does not cash flow then why buy it?

• You need a way to quickly evaluate the hundreds of opportunities available

• Helps you in determining the true value of a rental property

• You can use it to set a sale price or negotiate a better dealDavid Barr, Realtor, GRI, EMS

763-463-7511, [email protected] Keller

Williams Classic Realty NW04/13/2023

Page 5: Deal Or No Deal   Using Excel Spreadsheets

Basic information needed• Purchase price• Building income

– rent, laundry, garage, parking, etc.• Financing terms

– Interest rate– Percentage down– Type of loan (fixed rate, ARM)

• Expenses – Tax, utilities, insurance, etc.

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 6: Deal Or No Deal   Using Excel Spreadsheets

What it tells you

• If the property will cash flow• Potential purchase price or value• Net Operating Income (NOI)• Return on investment (ROI)• Capitalization rate (CAP rate)• Cash on cash return • All of the above help you make your

decisionDavid Barr, Realtor, GRI, EMS

763-463-7511, [email protected] Keller

Williams Classic Realty NW04/13/2023

Page 7: Deal Or No Deal   Using Excel Spreadsheets

It is a new world for RE investors• Bank financing is very tough to get

– Need cash! 20% -30% down (not 0 or 10%)

– Banks require cash reserves (6 months)– Buildings financial history more

important– Pay 1.5% - 3% higher interest rate– Credit scores of 720+ required– Limit of 10 investment properties (up

from 4)– Appraisals must use local & recent

comps

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 8: Deal Or No Deal   Using Excel Spreadsheets

It is a new world for RE investors• Property values are down

– Great for Buyers (the perfect storm)– Tragic for many Owners (can’t afford to

sell)• Expenses are rising and won’t go

down– Taxes– Utilities, gas, electric, water

Rents are rising (this is a good thing!)David Barr, Realtor, GRI, EMS

763-463-7511, [email protected] Keller

Williams Classic Realty NW04/13/2023

Page 9: Deal Or No Deal   Using Excel Spreadsheets

This is all that matters

• The only way to increase the value of a rental property is to increase the income and or reduce the operating expenses.

• Many sellers forget this and still want too much for a building, even though it looses money for the buyer. Bank won’t loan $.

• A buildings value comes from CASH FLOW

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 10: Deal Or No Deal   Using Excel Spreadsheets

Which 2 bed duplex do I buy?$189,900 - Robbinsdale

$119,900 – South Mpls

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 11: Deal Or No Deal   Using Excel Spreadsheets

Example – Robinsdale duplex• $189,900 asking

price• Income $1740/mo• Expenses $4570/yr• Financing

– 20% down– 6.5% interest

• Cash flow $4787/yrDavid Barr, Realtor, GRI, EMS

763-463-7511, [email protected] Keller

Williams Classic Realty NW04/13/2023

Page 12: Deal Or No Deal   Using Excel Spreadsheets

Example – South Mpls Duplex

• $119,900 purchase price

• Income $1740/mo• Expenses $10,510/yr• Financing

– 20% down– 6.5% interest

• Cash flow $3094/yr• Cap Rate 8.6%

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 13: Deal Or No Deal   Using Excel Spreadsheets

4-Plex with 2 bedroom units

• $450,000 purchase price

• Income $3875/mo• Expenses $13,500/yr• Financing

– 25% down– 6.5% interest

• Cash flow $7401/yr• Cap Rate 7.3

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 14: Deal Or No Deal   Using Excel Spreadsheets

4-Plex with 2 bedroom units

• $350,000 purchase price

• Income $3875/mo• Expenses $13,500/yr• Financing

– 25% down– 6.5% interest

• Cash flow $13,089/yr• Cap Rate 9.4

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 15: Deal Or No Deal   Using Excel Spreadsheets

Play with the variables

• Change the purchase price to fit your goals

• Modify the income & expense numbers to match your plans for the building

• See what a new interest rate or change in loan terms can do to help

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 16: Deal Or No Deal   Using Excel Spreadsheets

Play with the variables

• Change the purchase price to fit your goals

• Modify the income & expense numbers to match your plans for the building

• See what a new interest rate or change in loan terms can do to help or hurt you David Barr, Realtor, GRI, EMS

763-463-7511, [email protected] Keller

Williams Classic Realty NW04/13/2023

Page 17: Deal Or No Deal   Using Excel Spreadsheets

Handy hints for financial success• Buy buildings where the tenants pay

the utilities – this controls a variable cost that only

goes up over time• Buy buildings that have already been

fixed up – Roof, HVAC, plumbing, windows, etc.

• Buy buildings with potential to increase the income– Add bedrooms, laundry, garages, fix up

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 18: Deal Or No Deal   Using Excel Spreadsheets

Handy hints for financial success• Buy from motivated sellers• Get the lowest interest rate possible• Don’t over leverage yourself• Buy in areas where you can get good

tenants that pay you on time• Minimize your vacancies• Work with local banks for the best

loans David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 19: Deal Or No Deal   Using Excel Spreadsheets

What to remember

• Look on paper before driving• Cash flow will get you through any

economy• Buy right• Run a tight ship• Beware of rising interest rates – they

are property value killers• Today is the best time ever to invest in

RE

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023

Page 20: Deal Or No Deal   Using Excel Spreadsheets

Thank You for your interest

• I can send you a free copy of this spreadsheet

• I can teach you how to use it, and help you evaluate your rental property

• E-mail me at [email protected]• Or call me at 763-463-7511

David Barr, Realtor, GRI, EMS 763-463-7511,

[email protected] Keller Williams Classic Realty NW04/13/2023