Last week, we covered the first five steps of the Investment Property Valuation Calculator (IPV). In the sixth step, investors will examine the cash flow of their property. It’s a short step that asks buyers to enter or estimate the average percentage growth of their income and expenses in order to help you better understand the long-term health of your property.
Step 6 is the final section of the Investment Property Valuation Calculator before your ten-year report is calculated. In this phase, we’ll focus on the estimated annual growth of your income and expenses.
As time goes on, it’s likely the income and expenses your building generates will grow. To ensure you receive an accurate ten-year forecast, it’s necessary to know how much each will be growing by. Enter the best estimation of growth you have into the proper boxes. If you’re unsure of what the rate may look like, contact a local broker and ask for the numbers on similar properties in the same sector and area.
The Cap Rate at Sale box will automatically populate itself based on the information you’ve given in previous sections. If you need a reminder of what cap rate is, read myNOI’s article.
When you’ve entered all the values you can, hit “Go to next step” to see your ten-year property forecast report.
Come back tomorrow when we detail the final step of the Investment Property Valuation Calculator!