What math formulas do you use when you consider a new property?

[Daniel Patterson]

I'm starting to get a general idea of how I should look for a property that would be good to purchase, renovate, then rent out. I'm a little lost on which formulas I should use when considering a property. Things like cap rate, and appreciation and depreciation rates. 

What I'm wondering is, what are the standard formulas that an experience investor would use when considering a new property. 

You can just list what you use, and I can do the rest of the research on the formulas, and how to use them myself. IF you would like to explain them though.. go right ahead. 

Thanks

[Ben Leybovich]

Haha - depreciation rates...you are confused! :)

Cap Rate is a market metric - has nothing to do with performance of the property. I know many here talk of it as if it is property-specific -- they are wrong. @Frank Gallinelli would agree.

Not to say that you shouldn't price it, because you need to know the marketplace after all.

CCR is the most basic. Money in / Money out. The cash flows are represented as static, though, so not particularly accurate.

To get more precise, IRR and MIRR. This is where you begin discounting future cash flows to NPV.

But, more importantly, the answers these spit out are only as good as the in-puts, and the real trick is to know what in-puts to use. And this has nothing to do with formulas :)