Number crunching

So there are many different ways people use to find out whether they think a property is worth investing in.

But what are some of the formulas people use to help couch the numbers?

Does anyone use Microsoft Excel to do the math?

 

Can I ask what sort of numbers you are crunching? I have to say, when I try and figure out whether a property is worth investing in, there isn't a particularly big maths component to my decision making.

 

Anything really, CG potential, yields, increase in interest rates to see how you would go if there were any increases.

 

To be honest, nearly all the maths I use is only for the purposes of comparison - which only needs really basic calculations such as gross yield and rough costs for holding the property etc.

I find trying to use complex maths to predict things in the future to be quite artificial, and I can't see much value in it.

 

I just ran some numbers. Our last home went up 650k (87k per year) over the approx. 7.5 years we owned it.

To rent a decent property in Sydney over that time would have cost $550 per week.
The numbers...
500 x 52 = $28,600.
$28,600 x 7.5 = $214,500.
That's a staggering $214,500 in rent we didn't pay to a landlord, and instead we had an asset that went up $650k!

Our interest over that period was only about $25k per year (but we paid it right down).
And we nearly paid it off over that period.

So we could have flushed over 200k in just rent down the gurgler but what we did was pay down a house that just about doubled.

What can I say... bloody brilliant. Just needed a deposit to get going and a feeling of wanting to buy a home back in 2008, which was a good time to buy. Sydney's market may slow down at some time but i'm so glad to have been on this ride...

 

I just use a simple cashflow spreadsheet formatted to suit my phone. Allows me to run numbers fairly quickly.

 

Yes, I use Excel to do the math.

EDIT: I have shown so many spreadsheets to my mortgage broker that he calls me "Mr spreadsheet"

 

Yeah, I would guess that lots of us use it, but modelling will only run scenarios for you.

Excel won't tell you how much you can borrow, or what suburbs to buy, or what strategy/s to use, or how to structure your investments.

Ultimately, it's best use is in tracking cashflow and using it for tax time... Otherwise you're just playing with numbers.