You don’t have to be a massive sports fan to notice the effect that the best coaching has on teams: the best coaches get the best results possible from their players. This often tends to result in wins and championship. If a team performs poorly, it will to replace the coach rather than replace the players.Like anything that has the potential to be greatly rewarding, real estate investing is risky. You need to learn the ropes you so can minimize that risk. Real estate investing is a business where mistakes can be massively expensive. You can’t afford to make the same mistakes over and over; you have start out with good strategies, apply them well, and learn from any mistakes you do make.Sound, sensible real estate investment practices must become your habits quickly if you are to succeed at investing in real estate. A good real estate coach can help with that process. For one thing, the instant, objective expert feedback you will get from a real estate coach brings accountability into your process. You will understand the consequences of your actions, and cannot rationalize away your mistakes and missteps, pass the buck or pass on the blame.According to Vince Lombardi, one of the greatest football coaches of all time, winning is a habit, but so is losing. Which habit would you rather have, winning or losing? That’s not a question you had to think over very long, is it. A good real estate coach can do what even the best book or class cannot help you form winning habits.A real estate coach can also help you put together a business plan, and give you specific ideas as to what you need to do in order for your venture to be a success. Like a sports team, you will only reap the benefits of a good game plan if you carry out the game plan successfully. A good coach will keep your nose to the grindstone and put your feet to the fire. A good real estate coach can keep you moving forward, and help you through rough times and answer questions. A good real estate coach can also provide support, motivation, knowledge, and help you keep your focus.When you choose your real estate coach, you should choose someone who is actually active and successful as a real estate investor, and not someone merely trained in real estate who skipped the whole important middle step of being successful and went straightaway into training others. They should have many verifiable properties, and local properties are always better local properties are indicative that the real estate coach works locally, and will be available for training and answers. If you hire someone as a consultant, they should genuinely care about your future. Make them demonstrate this. If they don’t care about you before they take your money, they won’t suddenly start to care after they take your money.
Crunching rental property cash flows, rates of return and profitability numbers adequately enough for investors to make prudent real estate investment decisions can be quite labor-intensive. In fact, prior to the advent of computer technology it was very time consuming because it required the analyst to manually compute and format the results manually.Now with the advance of third-party software solutions, however, it has become common practice for investors and analysts to rely on software to do the number crunching for them. The benefit derived, of course, goes without saying: The time and effort they save by eliminating as many manual tasks as possible frees up time for them to pursue their real estate investing objective. Namely, to locate rental properties they might be able to acquire for profit.Nonetheless, this benefit is not understood by everyone who works with rental income property and conducts a real estate analysis. Strangely, it’s not uncommon to find, despite this age of technology, investors and agents who still compute and format the results manually.So it seemed needful to address the issue and to make a case about the benefits of using software to those of you that remain uncommitted.Rest assured, however, that my purpose is not intended to highlight any one particular software product, but rather to get you thinking about the “concept” overall. In other words, hopefully once you consider how we conducted a real estate analysis in the “old days” you will come to more fully appreciate why software evolved, the issues it solves, and how you can benefit as a result.OriginThe challenge to create a cash flow and rate of return analysis has been around as long as real estate investing. It’s difficult to imagine, in fact, that any investor throughout any time in history didn’t use some method to determine whether or not a property would result in a profit.Prior to the advent of computers, of course, that process had to always be performed manually. Even as recently as the early 1990’s, for example, I was conducting a real estate analysis with a calculator in one hand and pencil and paper in the other.Some of you remember the hardships and difficulties those of us working with income property had to resolve manually in those “early days”.The DataThe data associated with investment real estate is the heart and soul of any real estate analysis. This goes without saying. The real estate investor must understand the financial performance of a property in order to discern its particular value.Before computer programs, however, this presented several problems.Foremost, especially for novices, knowing what data was required for a meaningful bottom-line was not always understood. What constitutes a rental property’s operating expenses, for instance? Or what data is needed to arrive at a property’s net operating income, cash flow, or rate of return? What must be included to make revenue projections? And so it was.Then, of course, there was the issue of the math. Because by the same token the correct data is required, computing the numbers correctly is paramount. As a result, there was always the laborious task of checking and re-checking the numbers to ensure accuracy.Up until computers and third-party software programs came along that process always took plenty of time and involved a lot of second-guessing.The FormulasThere are a host of returns real estate investors rely upon to measure the worth of an income-producing property in order for the investor to determine how it compares to their individual investment objectives, and/or how its value stacks up to the values of similar types of property in the local market area.As a result, investors look at returns such as cap rate, gross rent multiplier, cash-on-cash, internal rate of return, and numerous others. Some of these returns require just simple math that can almost be computed in one’s head. But there are also many returns far more complex. For instance, rates of return associated with the elements of tax shelter and time value of money are certainly going to require nothing less than a financial calculator.The point is that each return constitutes a formula, and up until the availability of software solutions, those formulas needed to be learned.The PresentationsAnother (more subtle) issue facing anyone conducting a rental property analysis concerns the presentation. For in addition to ensuring complete and accurate data, at the same time it must be displayed well. That is, the reports must be constructed so the facts and figures are easy-to-read and easy-to-understand.Over the years I’m sure there have been real estate deals transacted with numbers presented on a napkin. But that’s far from the norm, and would certainly not fair well for presentations made to investors, colleagues, partners or lenders.Thanks to computers and software, all the efforts we once made to create professional-quality reports are a thing of the past. In today’s world, reports are created automatically and look better than ever.ConclusionA computer or third-party software program cannot guarantee your real estate investing success. Whether you own the most advanced PC, most recent MS Excel version, or maybe even more than one real estate analysis software solution, you’re not off the hook. You still have to do your research and homework.Nonetheless, there is a benefit to this technology if you wish to employ it. Hopefully this article has shed some light on the advantages. Here’s to your success.