Benchmarking cash flow (2) – Annual Returns

本帖於 2012-12-26 11:38:38 時間, 由普通用戶 Slothehz002 編輯

Following the introduction of benchmarking cash flow (1) with the link below, we will dive into more details of calculations.

http://bbs.wenxuecity.com/tzlc/515367.html

Let's start with some basic terms first:

CB:   Initial Cost Basis = (Purchase Price) + ((Closing Cost) – (Loan related cost)) 

ACB: Initial Adjust Cost Basis = CB + (Cost for Initial Improvement)

OE:   Annual Operation Expenses

NOI:  Annual Net Operating Income = (Annual Gross Rent Income) – (OE) 

CR%:   Annual Cap Rate = NOI / ACB 

AFI:   Annual Financing Interest Cost

EB:      Annual Equity Balance = ACB - (Annual Principal Balance) 

NCF:   Annual Net Cash Flow or Margin = (NOI – AFI)

ER%:  Equity Return =  NCF / EB


Notes:
1. CB should not include any loan related closing cost such as loan origination fees, points etc.
2. ACB could be tricky since you need to interpret what's the improvement vs. repair/maintenance cost. We can further discuss this topic later.
3. OE includes recurring expenses such as "Clean/Maint", "Mgmt/commission", Insurance, Repairs, Supply, "Property Tax", Utilities.
4. NOI does not include financing related cost such as mortgage interest cost.
5. EB should be adjusted based on the change of principal balance on annual basis. In normal circumstance, EB increases while principal balance decreases. Don’t confused EB with the equity based on the current market value. We only gauge the performance against to your investment capitol with your own cash including the incrementally earned rent income.

With CR% and ER%, you will be able fully measure the performance of each of your property with an apple-to-apple comparison. I will show some examples using this benchmarking method to illustrate how to analyze the cash flow performance in the next posting.


請閱讀更多我的博客文章>>>

 

  • Benchmarking cash flow (2) – Annual Returns
  • Benchmarking cash flow (1) - Introduction
  • Living Trust - Select Executor
  • Invest in Las Vegas - references
  • Property Tax - Impact on your margins
  • 所有跟帖: 

    啊呀。還有人來給上課啊。哈哈。。。。 -youxi88- 給 youxi88 發送悄悄話 (0 bytes) () 12/26/2012 postreply 11:40:38

    next be your turn. -jy101- 給 jy101 發送悄悄話 jy101 的博客首頁 (26 bytes) () 12/26/2012 postreply 11:42:31

    very nice...3 indicators I look for normally. -jy101- 給 jy101 發送悄悄話 jy101 的博客首頁 (544 bytes) () 12/26/2012 postreply 11:41:46

    fixed some formatting errors -Slothehz002- 給 Slothehz002 發送悄悄話 Slothehz002 的博客首頁 (110 bytes) () 12/27/2012 postreply 19:03:54

    請您先登陸,再發跟帖!