Target Return to Find Viable Properties

Rates of return are one of the key variables to determine whether or not a property is investable.


Often times investors focus solely on yield to make an investment decision = Net Cash Flow / Net Capital Invested. While "Cash on Cash" return is important it's not the only factor, as it neglects to take into consideration leverage, property growth, cash flow changes, etc.


Additionally, "Cash on Cash" (and all return metrics really) only focuses on a snapshot in time and neglects to take into consideration how a property evolves: renovations, increased rent, non-recurring expenses (e.g. maintenance), debt cash out, etc.


A more prudent method to evaluate a property would be to aggregate various return methods, look at key year, and look at how those returns evolve over time. In particular, the IRR and ROI are the most holistic, factoring all the moving pieces detailed above.


The REIF Model details various return metrics for a key year and over time on the Key Data Summary. Additionally, the model allows users to input their target return hurdles that create color changing cells (conditional formatting) based on the values to identify if those returns are good or bad (e.g. rate of return > 25% = highlighted green).


The REIF Model's comprehensive and visually dynamic return output gives investors the data they need to more quickly and effectively make an investment decision.