Simple rental income forecast.
The simple rental forecast shows cash flow before income taxes. Cash flow is the primary attribute used by real estate professionals. In other words, real estate investors use future cash flows to ascertain present value. Moreover, a basic knowledge of Excel or googlesheets is all that is needed.
The do it yourself rental forecast is a useful tool. Similarly, traditional real estate investors can use the excel workbook. Primarily, long term rental investments have predictable cash flows.
However, rental hosts need to be “hands on”. In other words, due diligence is vital. Because rental hosts get rated for their services, its a different business model. For instance, one bad rating can impact income. In contrast, landlords don’t have to worry about ratings. Therefore, traditional rental real estate requires less due diligence.
Geographical bias.
Hosts tend to invest where they live. In other words, they choose not to look for opportunities far from where they reside. Consequently, these hosts overlook opportunities throughout the United States, Mexico, Europe and the rest of the world. Today, there is a large well of data for rental hosts to use. In other words, there is no reason to have a geographical bias.
Real estate growth isn’t linear.
In other words, growth doesn’t occur in a straight line.
Call 800-705-9968 for a free consultation. Let’s create a plan for success.
Special Offer – New Clients!
One Hour Free QB Setup and Consultation
 |
 |
The Simple Rental Income Forecast
The rental forecast is limited.
In other words the forecast is the beginning of the process.
Create a customized model. Above all, customization is vital. Most importantly, a customized forecast can be tailored to meet an investor’s needs. It can always be modified. Notably, a do it yourself investor tool. STR Hosts are independent minded. In other words, they enjoy using the tool. Lucky for me I’m a CPA and I have an MBA in real estate finance. So working with spreadsheets comes, naturally.
Many investors start with the simple income forecast.
However, they discover their needs go further. The rental forecast doesn’t include:
|
|
Airbnb is growing in popularity. The Simple Income Forecast is a great Excel tool.
Real estate professionals are investing in short term rental properties. In other words, private equity firms, real estate syndicates and hedge funds see investment potential.
However, is the short term rental business for everyone? The answer is not clear. While most Airbnb hosts are successful, there are unplanned circumstances. For instance, many hosts have found the time commitments to be extensive. In other words, hosts need to be more hands on than they initially planned.
Above all, it’s important to do research before jumping into the home-sharing craze.
Notwhithstanding, all that is needed is a basic Excel or Google sheet knowledge. Likewise, some time aside to gather and enter the information.
Simple Rental Income Forecast
Due Diligence
If your short term rental forecast looks promising, dig deeper. In other words, find real-world accurate numbers. Do the best that you can. Furthermore, you should plug in different numbers to see if your ROI holds up. For instance, the simple forecast doesn’t consider location. So, you should create a forecast for each location. Consequently, the more you dig, the better your outcome will be. Compare your prospective forecasts with traditional rental properties. However, make sure to consider that long term rental properties have lower returns. Also, consider that traditional rental properties require less work. In other words, quantify how much time you are willing to spend.
Simple rental income forecast.
Hire a real estate expert. Someone who can create cash flow models. Notably, cash flow models should include the cost of capital, net present value and internal rates of return. Internal rate of return is the biggest determinant. Lucky for me, I’m a tax and real estate financial expert.
Hire a competent tax adviser. Lastly, have the tax adviser adjust the rental forecast for federal, state and local income taxes.
Recommendation.
I recommend you hire a short term rental real estate expert. Lucky for me, I am one. I love helping short term rental investors. So, call 800-705-9968 if you have any questions. I’ll do my best to answer your questions.
Above all, I love helping hosts succeed. Because I love what I do, I provide complimentary free consultation.
Understanding the market.
Do market research.
Find out what the vacancy rates are for traditional long term rentals. If they are high, consider the risk that traditional landlords “could be” future Airbnb competitors.
Firstly, get all the data you can on Airbnb.com. Secondarily go to Zillow.com. Thirdly, contact bankers, real estate agents and mortgage brokers. Lastly, tell the local professionals what your thoughts are. In addition, ask for feedback. In summary, ask for short term rental advice.
Do a “SWOT” analysis
SWOT stands for strengths, weakness, opportunities and threats.
- Strengths.
- Characteristics of the property which give it an advantage.
- Examples include:
- The location.
- Design of the property.
- Amenities
- Occupancy
- Guests likability of hosts.
- Examples include:
- Characteristics of the property which give it an advantage.
- Weakness.
- Characteristics which place the investment at a disadvantage relative to others.
- Examples
- The age of the property,
- the lack of infrastructure.
- Examples
- Characteristics which place the investment at a disadvantage relative to others.
- Opportunity.
- Characteristics a project can exploit to its advantage.
- For instance the future approval of an amusement park.
- The future construction of a subway line.
- Characteristics a project can exploit to its advantage.
- Threats
- Problems which can cause trouble.
- Examples include:
- The development of newer buildings, nearby.
- Market shifting of guests. For instanct the guests change preferences.
- Environmental and governmental issues.
- Problems which can cause trouble.
Return on investment
Returns between 5-10% are reasonable. Primarily, its a good idea to include conservative cushions for annual repairs, vacancy rates, redecorating and furniture replacement. Investing in a property yielding greater than 10% would be a great deal.
Lower-end properties tend to look better on paper than mid- and higher-end properties. However occupancy rates for these properties are often less than what is desired.
When considering a new potential investment, use a range of estimated numbers. In other words create multiple forecasts. Primarily, use the Save As function in excel to create different versions. In other words, create many different excel files. Similarly, you could create a single excel workbook with multiple tabs.
Rental Forecast
Forecasting rental income isn’t easy. Therefore it’s a good idea to hire a rental expert. Notably, a financial adviser can give you options. Lucky for me, I have an MBA from a good program, Fordham Gabelli Business School
Income taxes
The excel workbook doesn’t calculate income taxes. Forecasting income taxes requires personal knowledge. For instance, if you receive a raise it could affect your marginal income tax rate.
Airbnb Cost Segregation
Maximize deductions with an Airbnb cost segregation study.
Why choose an LLC?
A popular form of doing business.
Schedule C or E?
Discover the Best Option for Your short-term rental activity.
Airbnb tax advice
Minimize, reduce short term rental income taxes. Professional Airbnb CPA tax advice
Get a 2nd opinion!
MBA CPA Rental Real Estate Financial Advice
One hour Free Consultation
- investing in a rental property?
- Selling your rental property?
- Choice of entity? Have LLC questions?
- 15 year vs 30 year traditional graduated mortgage?
- Using a non-conventional mortgage such as an ARM, term or interest only?
- Home equity loan?
- Tax planning?
David Weinstein MBA CPA CFE
Contact Us
For inquiries or requests which require a more personal response, I will make every attempt to respond.