Hi guys
I’m new to the property investing scene and just wanted some help with an equation. I’ve learnt about a lot of equations regarding the returns on an investment however I am looking for something that can tell me the playoff or equilibrium point of return on a risk. Im not sure if this is something that is easily calculated or quite advanced but it would be great to be able to apply a formula to different properties that could reveal the risk to return ratio and reveal at what point they are at an optimum level (if there is such a thing).
Any help would be greatly appreciated
Cheers
adamDo you mean a cash flow calculator? Like to calculate whether a property is going to be positively or negatively geared?
Or do you want a calculator that analyses risk based on area, price, vacancy rates, crime and all those sorts of risks?
Ryan McLean
A Free Cash Flow Calculator For Property Investors
http://CashFlowInvestor.com.au/quicktestRyan McLean | On Property
http://onproperty.com.au
Email MeHi Adam,
Haven;t seen such a calculation tool around the place. I expect the 'risks' are not readily quantifiable and thus a calculation would be 'rough maths' anyway.
Maybe give that guy from the 'Numbers' TV show a call and see what he has:)
Adam,
there are a number of risks in property just like any investment. Rather than trying to develop just one equation I find it much more powerful to set up a spreadsheet with all the known variables eg. Int rate, occupancy rate, rent, projected growth etc.
This is allows me to model the outcomes for different scenarios ie what if interest rates go up 2% or cannot rent for 2 months etc.
I used to do this for each property but now just have an overall spreadsheet (model) for my portfolio.
I also have figures such as ROI, projected Net worth etc. To check that I am making good decisions and on target
Hope this helps.
BrettRisk analysis is fairly high end modelling. There are a number of software providers that have products to achieve this but its generally in the range of 1000’s of $$$.
Unless you have a tertiary qualification in maths or economics my guess is you will struggle with the formula. It’s certainly out of my league. However a few links that may interest you
http://www.zenwealth.com/BusinessFinanceOnline/RR/RiskAndReturn.html
http://www.investopedia.com/terms/c/capm.asp#axzz1dUJQ8fb3
http://www.kingdomventures.com/pdf/Seeking_Alpha.pdf
http://www.sans.org/reading_room/whitepapers/auditing/quantitative-risk-analysis-step-by-step_849 (includes formula)
Free spreadsheet (over 100)
http://www.exinfm.com/free_spreadsheets.htmlLatest Research on Investment Strategies, Asset Allocation Methodologies and Risk Management Techniques
http://www.lyxor.com/publications/white-papers.htmlHave fun.
Jack
try this link mate: http://www.bantacs.com.au/tools.php
Thanks guys you’ve been a great help .. I had a look at the links, very interesting stuff and Im in the process of setting up a spreadsheet to help me with risk analysis and other issues. It is a bit tricky though but Ill keep at it.
Thank again
adamajago5 wrote:Thanks guys you’ve been a great help .. I had a look at the links, very interesting stuff and Im in the process of setting up a spreadsheet to help me with risk analysis and other issues. It is a bit tricky though but Ill keep at it.Thank again
adamKeep us updated on your progress. I’d be interested in whatever you develop just out of curiosity
Jack
ajago5 wrote:Thanks guys you've been a great help .. I had a look at the links, very interesting stuff and Im in the process of setting up a spreadsheet to help me with risk analysis and other issues. It is a bit tricky though but Ill keep at it. Thank again adamYou might want to take a look at @RISK — Risk analysis software.
A great free resource to learn algebra, probability, statistics http://www.khanacademy.org/
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