Everyone 9 Financial Analysis
ForeclosureRadar.com Tutorial:
Perform a financial analysis on a specific property ForeclosureRadar makes it easy to do a quick financial analysis of a property for various investment strategies. This tutorial guides you through the steps to perform an analysis for purchasing at auction, purchasing subject-to existing loans, traditional purchases, or for listing a property.
Use ForeclosureRadar to: • Perform financial analysis on a property to determine return on investment, or net proceeds on a sale To get started, run a search, click a property in the map view or list view to view the More Details window. In the Financial Analysis panel click the Details button in the upper right corner.
Choose the type of analysis to be done. We offer three types of purchase analysis. • Auction analysis takes into account the fact that junior debts are wiped out at trustee sale, but senior debts are still owed. • Subject To is good for analyzing preforeclosure purchases in which the existing loans are not paid off at the time of purchase. • Traditional analysis assumes the use of a standard purchase agreement where all past due loans and taxes are paid in full. And finally, Listing analysis allows quick calculation of the net proceeds to the seller upon sale after commissions and closing costs – very useful for determining how short a short sale is.
Perform a financial analysis on a specific property
1
We’ll use the Listing analysis for our first example.
Note that most of the fields have been prefilled for you and that it already shows that a sale of this property will be $361,843 short of being able to pay off the existing debt. This estimate is based on our Estimated Value, which you can adjust to current market value by entering a new Sale Price. Closing Costs and Commissions are automatically set based on default values that you can configure in the My Account Defaults tab. And finally, loan payoff amounts are based on the public records data we have available. Note that you will likely want to adjust the balances and past due amounts as you learn more about the existing debt on the property. As you can see, it takes just seconds to get a great idea of whether the property still has equity or must be listed as a short sale.
To customize Financial Analysis defaults: 1. In the main menu, select My Account. 2. Click the Defaults button. 3. Scroll down to My Financial Analysis Defaults. 4. Enter your defaults. 5. Click the Update button.
Perform a financial analysis on a specific property
2
Next we’ll look at purchase analysis. The three types of purchase analysis are fairly similar with minor differences that we’ll cover as we review each of the four tabs: Summary, Investment, Proceeds and Expenses.
Starting with the Summary tab, note that we analyze two different investment strategies, a resale or flip strategy designed for short term investors, and a rental strategy for long term buy and hold investors. For the resale strategy, Profit is a simple calculation of taking the proceeds from the sale, and subtracting your investment and holding costs. Holding costs are based on the monthly expenses and the number of days held. Return on investment is annualized to make it is easier to compare to other investments. For example if you made a 10 percent return on investment in 6 months, this would show as a 20 percent annualized return. For the rental strategy, monthly operating income is Rent minus expenses. Rent is prefilled with the HUD fair market rent for that area and you can change it. Return on investment is annualized, comparing your out-of pocket-investment to annual operating income. This type of analysis is sometimes referred to as the cash-on-cash return.
Perform a financial analysis on a specific property
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Next let’s look at the Investment tab.
Note that you can also get to this tab by clicking Investment under the Rental or Resale headings on the Summary tab. Note that the items shown on this tab vary depending on the type of analysis. For example, on the first line we have Bid Amount for Auction analysis, Cash to Seller for Subject To purchases, and Offer Amount for a Traditional purchases. Repairs applies to all three purchase types as does New Financing. Repairs are prefilled based on a default repair cost per square foot, which you can set in the My Account Defaults tab. Note that the amount of the new financing is deducted from your investment, as the total Investment is the amount you are out of pocket rather than the total amount paid for the property. You can enter the payment for new financing here, even though it is a monthly expense. Past-due property taxes, eviction costs and past-due existing loans show up based on the analysis type. For example none of them apply to a Traditional purchase, where the property is bought free and clear of existing debt. The total investment is shown at the top and used to determine profits on the Summary tab.
Perform a financial analysis on a specific property
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Next let’s look at the Proceeds tab.
This tab calculates the net proceeds you will receive upon the sale of the property and is only used in the resale analysis. Sale Proceeds is equal to the Sales Price minus seller-paid Commissions and Closing Costs, and minus existing loans paid off at the time of sale. Sale Price is prefilled with our estimated value for the property, which you can change to your value. Closing costs and commissions are calculated as a percentage of the sale price, and you can adjust the default percentages in the My Account Defaults tab. Any new financing you used to purchase the property, and entered in the Investment tab, is deducted. The final section allows you to enter balances on loans that existed prior to your purchase. This is important when purchasing a junior loan at auction as senior loans will still need to be paid off, or for purchasing properties Subject To these existing loans as they will also need to be paid off upon sale. Note that you also enter pastdue and payment amounts for these loans here, even though past-due amounts are calculated as part of the investment, and payments as part of the monthly expenses.
Perform a financial analysis on a specific property
5
Let’s review the Expenses tab, which totals the typical monthly expenses associated with holding a property.
Insurance, utilities, property management and HOA dues are prefilled based on defaults that you can set in the My Account Defaults tab. Property taxes are based on the current annual property taxes for the property, divided into monthly amounts. Existing loan payments are based on the payments entered for the existing loans under the Proceeds tab, and the New financing payment is based on the new financing payment entered on the Investment tab. These monthly expenses are added together and shown as the total monthly expenses at the top. Going back to the Summary tab, you’ll see any changes you made in the other tabs. Before closing the window, be sure to click Save. This will allow you to search on these numbers and see them in your saved properties search results. Also be sure to update the Financial Analysis defaults in the My Account Defaults tab to reflect your own business practices. If you ever want to remove the changes you made and return to the default values, click Apply Defaults. Work smarter, not harder by using ForeclosureRadar to do a quick financial analysis of a property for various investment strategies.
Perform a financial analysis on a specific property
6
Perform a financial analysis on a specific property ForeclosureRadar makes it easy to do a quick financial analysis of a property for various investment strategies. This tutorial guides you through the steps to perform an analysis for purchasing at auction, purchasing subject-to existing loans, traditional purchases, or for listing a property.
Use ForeclosureRadar to: • Perform financial analysis on a property to determine return on investment, or net proceeds on a sale To get started, run a search, click a property in the map view or list view to view the More Details window. In the Financial Analysis panel click the Details button in the upper right corner.
Choose the type of analysis to be done. We offer three types of purchase analysis. • Auction analysis takes into account the fact that junior debts are wiped out at trustee sale, but senior debts are still owed. • Subject To is good for analyzing preforeclosure purchases in which the existing loans are not paid off at the time of purchase. • Traditional analysis assumes the use of a standard purchase agreement where all past due loans and taxes are paid in full. And finally, Listing analysis allows quick calculation of the net proceeds to the seller upon sale after commissions and closing costs – very useful for determining how short a short sale is.
Perform a financial analysis on a specific property
1
We’ll use the Listing analysis for our first example.
Note that most of the fields have been prefilled for you and that it already shows that a sale of this property will be $361,843 short of being able to pay off the existing debt. This estimate is based on our Estimated Value, which you can adjust to current market value by entering a new Sale Price. Closing Costs and Commissions are automatically set based on default values that you can configure in the My Account Defaults tab. And finally, loan payoff amounts are based on the public records data we have available. Note that you will likely want to adjust the balances and past due amounts as you learn more about the existing debt on the property. As you can see, it takes just seconds to get a great idea of whether the property still has equity or must be listed as a short sale.
To customize Financial Analysis defaults: 1. In the main menu, select My Account. 2. Click the Defaults button. 3. Scroll down to My Financial Analysis Defaults. 4. Enter your defaults. 5. Click the Update button.
Perform a financial analysis on a specific property
2
Next we’ll look at purchase analysis. The three types of purchase analysis are fairly similar with minor differences that we’ll cover as we review each of the four tabs: Summary, Investment, Proceeds and Expenses.
Starting with the Summary tab, note that we analyze two different investment strategies, a resale or flip strategy designed for short term investors, and a rental strategy for long term buy and hold investors. For the resale strategy, Profit is a simple calculation of taking the proceeds from the sale, and subtracting your investment and holding costs. Holding costs are based on the monthly expenses and the number of days held. Return on investment is annualized to make it is easier to compare to other investments. For example if you made a 10 percent return on investment in 6 months, this would show as a 20 percent annualized return. For the rental strategy, monthly operating income is Rent minus expenses. Rent is prefilled with the HUD fair market rent for that area and you can change it. Return on investment is annualized, comparing your out-of pocket-investment to annual operating income. This type of analysis is sometimes referred to as the cash-on-cash return.
Perform a financial analysis on a specific property
3
Next let’s look at the Investment tab.
Note that you can also get to this tab by clicking Investment under the Rental or Resale headings on the Summary tab. Note that the items shown on this tab vary depending on the type of analysis. For example, on the first line we have Bid Amount for Auction analysis, Cash to Seller for Subject To purchases, and Offer Amount for a Traditional purchases. Repairs applies to all three purchase types as does New Financing. Repairs are prefilled based on a default repair cost per square foot, which you can set in the My Account Defaults tab. Note that the amount of the new financing is deducted from your investment, as the total Investment is the amount you are out of pocket rather than the total amount paid for the property. You can enter the payment for new financing here, even though it is a monthly expense. Past-due property taxes, eviction costs and past-due existing loans show up based on the analysis type. For example none of them apply to a Traditional purchase, where the property is bought free and clear of existing debt. The total investment is shown at the top and used to determine profits on the Summary tab.
Perform a financial analysis on a specific property
4
Next let’s look at the Proceeds tab.
This tab calculates the net proceeds you will receive upon the sale of the property and is only used in the resale analysis. Sale Proceeds is equal to the Sales Price minus seller-paid Commissions and Closing Costs, and minus existing loans paid off at the time of sale. Sale Price is prefilled with our estimated value for the property, which you can change to your value. Closing costs and commissions are calculated as a percentage of the sale price, and you can adjust the default percentages in the My Account Defaults tab. Any new financing you used to purchase the property, and entered in the Investment tab, is deducted. The final section allows you to enter balances on loans that existed prior to your purchase. This is important when purchasing a junior loan at auction as senior loans will still need to be paid off, or for purchasing properties Subject To these existing loans as they will also need to be paid off upon sale. Note that you also enter pastdue and payment amounts for these loans here, even though past-due amounts are calculated as part of the investment, and payments as part of the monthly expenses.
Perform a financial analysis on a specific property
5
Let’s review the Expenses tab, which totals the typical monthly expenses associated with holding a property.
Insurance, utilities, property management and HOA dues are prefilled based on defaults that you can set in the My Account Defaults tab. Property taxes are based on the current annual property taxes for the property, divided into monthly amounts. Existing loan payments are based on the payments entered for the existing loans under the Proceeds tab, and the New financing payment is based on the new financing payment entered on the Investment tab. These monthly expenses are added together and shown as the total monthly expenses at the top. Going back to the Summary tab, you’ll see any changes you made in the other tabs. Before closing the window, be sure to click Save. This will allow you to search on these numbers and see them in your saved properties search results. Also be sure to update the Financial Analysis defaults in the My Account Defaults tab to reflect your own business practices. If you ever want to remove the changes you made and return to the default values, click Apply Defaults. Work smarter, not harder by using ForeclosureRadar to do a quick financial analysis of a property for various investment strategies.
Perform a financial analysis on a specific property
6
