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Software: Residential Investment Property Analysis

Diana Clement continues our series on technology aids for property investors.

Monday, October 16th 2006, 12:00AM

by The Landlord

Simple spreadsheet, powerful results
Price: US$29 ($46)
Overall rating: 3 out of 5

We all know the majority of investment properties are bought without proper analysis. Yet it seems there are almost endless opportunities to do your analysis using software, online or just with a plain old paper and pen.

Many investors use products such as RevIQ, PIA (Property Investment Analysis), RentalAnalyst and REAP and swear by them. But the cheapest is $129 and the most expensive more than $900.

For US$29 (NZ $46) you can get the Residential Investment Property Analysis (RIPA) spreadsheet. The product is two quite simple Microsoft Excel spreadsheets which allow you to enter data about a potential investment and then view forecasts for how that property will perform over 15, 20, and 25 years. One spreadsheet is for table mortgages and the other for interest only.

The ultimate purpose of this software is to eliminate guesswork and let you decide whether or not to buy a property based on the numbers, not a gut feeling. Sometimes what appears to be the ideal rental or investment simply isn’t. The numbers just don’t stack up.

In order to use the RIPA spreadsheet you’ll need some basic data – which you should be able to get from the estate agent selling the property. This includes the value of buildings, land, and chattels, and the estimated rent. You may need to play around with these figures and speak to a valuer if you’re unable to get a suggested figure from a real estate agent.

In total, you need to fill in 22 boxes relating to purchase price, loan variables, depreciation, estimated capital growth, your income and tax rates and so on. It’s not terribly onerous.

At the bottom of the entry screen is a summary showing you instantly whether the numbers stack up. There’s even a helpful message that says, “Making the required return?” with the answer “Yes” or “No” beside it.

Below, you see a cash flow analysis, a ten-year equity analysis, and a scenario analysis of the effect on net present value of the property of interest rates rises and/or rental level.

Being a spreadsheet, it’s possible to run ‘what-if’ scenarios anywhere in the software by simply changing one figure and seeing the effect on the ultimate cash flow over time or the equity growth.

It certainly doesn’t take many such calculations for the software to start paying its way; by encouraging you to buy a property you may not have considered otherwise, (assuming other factors such as location and rentability also stack up), or to stop you buying the house of your dreams that might prove an investment dog.

Once you’ve filled in the data, you can simply save it as you would a normal spreadsheet, and then start afresh with a new property.

It’s a simple download and install process. Once you’ve paid online it’s a matter of clicking on the .exe file, which installs the two spreadsheets on your computer and also the Word help file.

On the downside, this is a pretty basic spreadsheet. It doesn’t have an input wizard – to help those people who freeze at the site of a spreadsheet. Nor does it have help within the sheet. However, the document that comes with it describes all you need to know in pretty simple language.

As well, it doesn’t automatically produce graphs or reports that can be sliced and diced – unless you’re a power user of Excel. There is something about multicoloured graphs and charts that somehow make these programs come to life.

While the input screen has a bit of colour added to it and a bit of formatting, the remainder of the results screens are a sea of black and white figures and spreadsheet cells. They certainly do the job, but the numbers don’t jump off the page.

RIPA is not hugely different in its results from the Acumen Property Investment Spreadsheet, which costs NZ$29.95 on CD or $24.95 downloaded.

RIPA is not trying to be an all-singing and dancing REAP, PIA or RevIQ software. Its main competitor is Acumen Property Investment Spreadsheet.

System requirements:
· PC only, no specific Mac versions
· Microsoft Excel 97 or above.

Verdict: Simple property investment analysis software
Pros: Quick and easy to use. Anyone with a basic knowledge of spreadsheets will be away in seconds.
Cons: No input wizard, charts, graphs or reports that can be sliced and diced easily.


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Westpac - Offset 4.59 - - -
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