Understanding Decision Metrics
Begin by exploring the different decision metrics that help determine whether to proceed with a project. These include averages, comparisons, and key financial indicators.
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Comparing Properties
Learn how to compare different properties side by side by creating multiple copies of the same feasibility study and adjusting assumptions for each scenario.
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Finance Assumptions and Ratios
Understand the financial assumptions and ratios, such as lender’s yield, debt coverage ratio, and break-even ratio, which are critical for evaluating the feasibility of the project.
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Analyzing Key Metrics: IRR, Cash on Cash Return, NPV
Review key metrics like Internal Rate of Return (IRR), Cash on Cash Return, and Net Present Value (NPV), which provide a snapshot of the project’s financial health.
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Capitalization Rate and Rental Yields
Examine the property’s capitalization rate, exit value cap rate, and rental yields, which help estimate future income and potential sale value.
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Growth on Equity Return
Learn how to assess the growth on equity return, which shows how much equity is being built up over time and the return generated from it.
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Understanding Cash Flow and Debt Service
Delve into the cash flow from operations, debt service, and net cash position, which combine property income and taxable income to give a complete financial picture.
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Using the IRR Matrix
Explore the IRR Matrix to determine the best time to sell the property for maximum return, based on the internal rate of return over different holding periods.
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Adjusting Analysis Based on NOI Cap Rate
Learn how to adjust the analysis using the NOI cap rate to reflect changes in property value and potential sale proceeds.
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Calculating Profit Before Tax and Discounted Cash Flow
Review the final calculations for profit before tax, discounted cash flow, and the two different IRRs, which help in making an informed decision.
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