Analyzing Your Investment Opportunity

Operating Expenses … Vacancy Rates … Cash-on-Cash Return … Cap Rate … Cash Flow Before Taxes … Cash Flow After Taxes … NOI … DCR … GRM … IRR … mIRR … OMG … TMI! Clearly, there are a lot of different indicators that an investor can look at and take into consideration while evaluating a property for real estate investment purposes. Which ones really matter, though? Well, there are a couple different things that I like to look at. The first one is cash flow AFTER taxes. There is no other metric that will have a bigger impact on your current day-to-day life than this one! After all, the name of the game is to put benjamins in your pockets – and that’s what this is all about. However, I need to caveat this! Although the game we play is about money, it’s not necessarily in our best interest to collect that money today. This is where it is extremely important to have a well thought out Purposeful Plan to execute against. You very likely can make more money in the long run by deferring cash flow today. Sounds a little counter-intuitive, doesn’t it? Well, that’s all the more reason you should be working with a pro rather than trying to do it yourself. Another metric that I like to key in on is the IRR, or Internal Rate of Return. However, I actually prefer the mIRR over the IRR. The mIRR, or Modified Internal Rate of Return, takes into account that any reinvested cash flow will work for you at, possibly, a different return rate. But aside from that, one of the reasons I really like this metric is because it helps you compare the performance of this property against other investment vehicles. Taking your risk tolerance levels into consideration, the IRR or mIRR will help you evaluate the opportunity cost as it relates to this property. Cash-on-cash returns, Cap Rates, GRM, etc … these all have a time and a place while evaluating an investment opportunity, but they’re not my heavy hitters. For me, it’s about looking at the cash flow after taxes; it’s about using the mIRR for comparison against other opportunities; and it’s about seeing how all of this fits into your governing purposeful plan. If you want to see an example of how I evaluate a property, give me a call (925-817-8428) or shoot me an email (brian@sparrproperties.com) and I’d be happy to show you. Even better, I’ll be happy to do this work for you as I help you invest in your next place :)

Why Work With the SPARRproperties Group?
Arek P. recommends Walnut Creek Home Buyers Choose Brian Sparr
We easily went through 12 agents before running into Brian. Brian immediately stood out from the pack – he is extremely knowledgeable, smart, and real estate is his passion – which is an important distinction and an absolute necessity for a great agent.
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Jenny K. recommends Concord Home Sellers Choose Brian Sparr
Brian is hard-working, ethical, timely, savvy, confident yet modest, knows the in’s and out’s of the current market, and a really nice guy on top of it all. If you have any doubt, at least meet with him!
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Dennis H. recommends East Bay Real Estate Investors Choose Brian Sparr
I do not think I have worked with anyone in ANY business that demonstrates the kind of dedication, integrity and diligence of Brian Sparr. I would never again work with another realtor and would recommend Brian Sparr to anyone without hesitation.
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Alan M. recommends Out-of-State Real Estate Investors Choose Brian Sparr
Brian’s been an incredible advisor, setting expectations for short sale & foreclosure opportunities, educating me on commercial property financial modeling, and going beyond the number crunching...
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