BiggerPockets Book Club Real Estate by the Numbers- Part 2
Welcome to a new week of Real Estate By the Numbers Book Club! I know we have a few that will hopefully join us this week as well since their books have arrived. This is where we started diving into the math! There's always two camps: "I've got a spreadsheet for just the occasion", and "Great, now I have to admit that I DID use algebra as an adult!" Either camp is welcome here! 😊
If you haven't added your thoughts to part 1, you can find the thread here: https://www.biggerpockets.com/...
Please feel free to share your own thoughts and questions regarding this section. What did you agree or disagree with? Did you find any "ah-ha" moments that tied to the previous section? If you prefer, you can also use some of the guided suggestions here.
1. When looking at debt pay down, do you consider whether the interest is simple or daily compounding? If there are two similar amounts, when and how do you decide which to pay down first?
2. What is your own opportunity cost when it comes to being an investor? Did those factors come into play with how you choose to invest?
3. Do you reinvest the profits back into your business? Is there some type of hybrid of reinvestment you put back? What helped you arrive at that decision?
4. Have you considered expected value in your purchases? Do you calculate expected value as you learn a new market?
5. Were you surprised at the EV scenario given between the two company investments? For those people that tend to be more risk- averse in their deals, did this change anything for you? Do you utilize a decision tree?
6. Have you taken into account TVM (time value of money) to help negotiate a deal or make a decision? Was there anything in the calculation that proved to be wrong in the end?
7. Have you used the discounted income stream approach to assessing when to sell or hold? Is there a different formula you used?
8. The side by side analysis of current value between properties is something to consider when evaluating properties. Are there other factors that you would additionally consider before making a final decision?
9. With those of you who like to do owner finance deals, do you find that explaining NPV proves difficult?
10. When deciding on a deal, do you have a set let of calculations you run through to pass each stage of approval? Is IRR a calculation you use regularly?
11. We all want to avoid paying, but when does the tax benefit come into consideration?
12. Do you use accelerated depreciation on all or some of your purchases? What is your baseline to deciding if it is worth taking now? If the TVM concept going to play a part in evaluating when to use accelerated depreciation in the future?
There was lots to chew on in this section, so let's get talking.