The Real Estate Cash Flow Calculator

>I would like to make some adjustments to the spreadsheet so I can use it here in america…what is the password to unprotect the3 worksheet? If you don’t want to send it to me please send me a spreadsheet that includes a 30 year loan in U.S. $.

Thanks

>Awesome stuff…great work! Is there something similar for networth analysis?

>Hi Deepak,

It has really been an informative article & your blog is really great…thanks a ton for your articles & keep going.

Ajay Hegde

>Harrison: Thanks…I don’t know the US market too much – i.e. what the tax saving incentives are, any special costs etc. I can create one though, if someone can help with the data!

>Dear Deepak,

Have you made a U.S. version of your real estate investor cash flow sheet? If you have I am interested in viewing it. If you have not and still need the data, I am an American appraiser/investor who would like to help you with it. Thank you idrismartin@hotmail.com

>Hi Deepak,
Fantastic of work. Chotta sugestion, most people when they rent out their properties take and advance payment “usually = to 6-10 months rent” which if deposited in the bank will fetch interest – can u include this component in ur spreadsheet.

Thanks
ashok

>Hey Deepak …. excellent work .. i was making smething similar for my own use but this is far more comprehensive. I need to change a few conditions in the sheet though – Rental value of property bought is different from rent being paid by me in my current home. Also, tax benefits on interest apply to me but not the principal coz that is already covered through other investments. Can you send me an editable version or share the password.

Thanks

>Great job Deepak.

I understand you dont blog here anymore but an implicit assumption that you are making is that rent paid by the buyer will be equal to rent received. This can throw a lot of things out of gear.

>Some observations on your calculations:

If a flat costs Rs 45 lakh, one has to pay at least Rs 15 lakh in cash under the table. While this would bring down the EMIs on the rest of the sum, the actual interest outgo could be higher.

Either one would have to pledge other debt instruments like National Saving Certificates (at yeild plus 2 or 3 per cent basis) or borrow at commercial rates to raise the black money component.

A flat costing Rs 45 lakh will get just Rs 17,000 by way of rent every month or Rs 2,04,000 annually. Annual rent increases are just about 15-18 per cent but this happens only when property prices are continually rising.

At present in Mumbai when property prices are weakening, rent increases cannot happen automatically. Say, if property prices are down 20 per cent and stays that way for two or three years it becomes cost effective for one to buy rather than rent assuming that rents go up 20 per cent annually.

>Houses are not bought just for the pleasure of owning one! If you are a renter who has to shift places every 11 months and play two months rent to the broker every time you move, then buying your own place can solve many problems.

Troubles only multiply if you are young, single and need to live alone. Housing societies frown upon young singletons especially if they have guests…..

>Hi Deepak,

I have house of my uncle in the heart of the Pune city its around 18 yrs old 1BHK flat. SHould I purchase that flat which will cost me less around 10 lakhs or go for a brand new flat in outskirts of the city ?
Please let me know which is the good option as we are currently staying in that flat and are used to it but it needs some renovation.

>hi,
Two facts you have forgotten -
1 – The property value keeps on increasing however there is some correction in between – typically the correction is around 6th and 7th year from the turn of the cycle as I write 2009 sep we have a turn around from the correction cycle so the returns would be constant for next 6 years

2 – The property in India has social security attached to it – ask the bank to provide you the loan for its stocks – the haircut is 70% of the present value

;)

>1) Plz check calculations based on location of real estate being Mumbai not Banglore.
2) Real Estate has just 3 rules, location, location & location.
3) e.g. Thane a Mumbai subarb area, booking started @ Rs.900 a sq.ft. & in less then 10 Yrs. is @ aprox. Rs.5100 a sq.ft after going up to Rs.6100 a sq.ft. though rents are lo there price still remains strong as ever.
4) this Rs.900 a sq.ft. can never see a price of Rs.500 a sq.ft. it can just go from 5100 to maybe Rs.4100 or Rs.3100 right ? So, it's the best investment one can make in India. (Real Estate).
5) There are 100 ways of doing Real Estate biz. SRA Projects is one place u can see huge action too :)

>hi, i liked your calculater, its developed nicely and perfect.

>Thanks a lot for sharing this!

There seems to be an error in the Cash Flow calculations considering Opportunity Costs. I have explained below w.r.t. your excel 'Data' worksheet cells:

Accrued Gain or loss including Opportunity cost
= (Net proceeds of buy decision) – (Net benefit of choosing alternative of "renting and SIP" over buying)
= (G48) – (G68 – G73)
= (G48) – (-G75)
= G48 + G75

Hence, G49 = G48 + G75 instead of G49 = G48 – G75.

Similarly, the Annual Gain or loss considering Opportunity Costs should be G47 = G46 + G76 instead of G47 = G46 – G76.

This way the "Buy v/s rent" chart would also be in sync with the "Cash flow with opportunity cost" chart – where at the point when this adjusted annual cash flow turns positive, the decision shifts in favor of buy.

Regards,
Ishwar.

Deepak,

I’m 27, earn a salary in India, and I want to make a decent real estate portfolio to earn passive income (and an early retirement). Just today I too made a sheet very similar to yours after listening to a Kiyosaki tape. In that he mentions that if he expects $1000 rent from, he’d not pay more than $100,000 for the property.

By similar logic, if you expect Rs. 15,000 rent from any property in India, it should be around Rs. 15 lakhs (say even 20-25 lakhs). I stay in Bangalore and I don’t see any such properties around. The ones that fetch you Rs. 15,000 in rent easily cost more than Rs. 40-50 lakhs. I sat down and made an elaborate sheet, and didn’t find ANY way to make a real estate investment cash flow positive.

I’d find it helpful if, in the current Indian context, you can share ways to:
1. Get tax deductions not limited to the paltry 1.5 lakh under 80C
2. Find the deals as above (I know it’s not easy, but do you have any pointers for the readers here?)
3. Buy an old flat relatively cheap, touch it up and rent it out to get at least marginally positive cash flow
4. Use home equity loans etc. to make cash flow positive

I understand that you might have answered some of these in your articles on Yahoo Finance etc., and I’d be very happy with just the links too (I’m continuing my online research).