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A reserve fund is a method of setting aside funds for
anticipated future expenses and
capital replacement. The On Target
software allows you to put a percentage of your after-tax
cash flows into a reserve fund if you wish. The Allocation of
Cash Flow report summarizes after-tax cash flows that were put into
a reserve fund and after-tax cash flows that are available for
reinvestment. The cash for reinvestment amounts are after-tax
cash flows that are available for other investments. For
example, it could be invested in another real estate project, the
stock market or put into an interest bearing account. The real
estate investor supplies the anticipated rate of return for the cash
for reinvestment amount. The Future Wealth report shows the
investor's net worth for each year 1 through 10 that would be
accumulated based on the growth rate assumptions supplied for
income, expense and appreciation and the investor's tax rate
information. After-tax cash flows, the after-tax return on
cash flows and after-tax sales proceeds are accumulated to arrive at a future wealth
dollar amount for each year. The future wealth report
demonstrates the net worth building potential that can be achieved
through real estate investing. The initial investment amount
and the future wealth amounts are then used to calculate the
investor's average return, modified internal rate of return or MIRR, for each
year. The MIRR value for each year is the
average yearly return that would be required to accumulate the
future wealth dollar amount starting with the investor's down
payment.
Present value is the amount of money in today's dollars that is
required to
accumulate a sum of money in the future. The calculation
uses a specified time period and compound
interest rate.
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Advantage Software LLC
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