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The On Target Sensitivity Analysis Function is a powerful tool that
allows the real estate investor to modify up to nine different
financial variables for an income property to assess the
impact on the investor's bottom line. The real estate investor
can change the purchase price, initial investment amount, loan
interest rate, vacancy factor, appreciation growth rate, income
growth rate, expense growth rate or the reinvestment rate of return
and compare current property financial projections to the
modified property financial projections.
In the example below the real estate appreciation growth rate was
changed from 4 percent to 7 percent. Note that this change
caused the investor equity in year 10 to increase from 354,543 to
576,086 and the investor after-tax future wealth in year ten to
increase from 596,352 to 770,049. The investor's
after-tax modified internal rate of return increased from 20.54 to
23.66.
Any top notch real estate investment analysis software should
include a Sensitivity Analysis tool. It allows the investor to
quickly run different scenarios to determine the impact on future
profits.
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Advantage Software LLC
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