All Topics / General Property / Can Anyone Help Me With An Equation

Viewing 9 posts - 1 through 9 (of 9 total)
• se7en
Participant
@se7en
Join Date: 2011
Post Count: 54

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

Ryan McLean
Participant
@ryan-mclean
Join Date: 2010
Post Count: 547

Do 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/quicktest

Ryan McLean | On Property
http://onproperty.com.au
Email Me

Derek
Member
@derek
Join Date: 2004
Post Count: 3,544

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:)

Brett73
Participant
@brett73
Join Date: 2011
Post Count: 8

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.
Brett

JackFlash
Member
@jackflash
Join Date: 2011
Post Count: 66

Risk 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.investopedia.com/terms/c/capm.asp#axzz1dUJQ8fb3

http://www.kingdomventures.com/pdf/Seeking_Alpha.pdf

Latest Research on Investment Strategies, Asset Allocation Methodologies and Risk Management Techniques
http://www.lyxor.com/publications/white-papers.html

Have fun.

Jack

Member
Join Date: 2011
Post Count: 105
se7en
Participant
@se7en
Join Date: 2011
Post Count: 54

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

JackFlash
Member
@jackflash
Join Date: 2011
Post Count: 66
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

Keep us updated on your progress. I’d be interested in whatever you develop just out of curiosity

Jack

nicolas_b
Member
@nicolas_b
Join Date: 2009
Post Count: 21
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 adam

You 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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