Reddit reviews What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition
We found 4 Reddit comments about What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition. Here are the top ones, ranked by their Reddit score.
MCGRAW-HILL Professional
Why would you be calculating what you need to break even since breaking even isn't the goal?
There should be calculation for cash flow that would include the principal payments as a negative, but there should also be a calculation for ROI which should not be lessened by the principal payments.
Check out this book: http://www.amazon.com/Estate-Investor-Financial-Measures-Updated/dp/1259586189/ref=sr_1_fkmr2_1?ie=UTF8&qid=1462889525&sr=8-1-fkmr2&keywords=cashflow+what+every+real+estate
What you’re actually trying to calculate is Internal Rate of Return (IRR), which assesses the total return of a property against other potential investments.
I highly recommend picking up Frank Gallenelli’s book “What Every Real Estate Investor Needs To Know About Cash Flow...”
https://www.amazon.com/dp/1259586189/ref=cm_sw_r_cp_api_i_u3C7CbS0Y2RVK
I'm registered at biggerpockets.com but honestly haven't looked into it much. I just sort of winged it by doing my own market research. However, I only have 3 doors (about $300/month/door cash flow), so I'm not sure you'd want to do it my way.
Good books I recommend:
I'm personally just getting started investing and am still in the process of building out a spreadsheet that includes an IRR calculation for example, so take the below advice with a grain of salt.
The GP mentioned some of the other aspects to consider in their comment. For a good primer on the numbers side of things, consider picking up this book: What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures.
You can build a spreadsheet that calculates your equity buildup (which is ignored by cash-on-cash return) as well as tax benefits, transaction costs to sell and therefore total return after a certain # of years, you can model different rates of appreciation on the value of the property, etc.
If you want to get really fancy (what I would consider to be pretty sophisticated) you can also run an IRR (internal rate of return) calculation. You'll have to plug in an "opportunity cost" rate of return to compare against for IRR, and one option is to use historical average S&P 500 returns (let's call it 10%) as a baseline for comparing your proposed investment with a more passive one. The above book walks you through how to do that in Excel.