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Real Estate Economics and Budgeting August 28, 2008

Posted by DustinRJay in Calgary real estate, valuation models.
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I think having a budget that you are comfortable with is critical to any investment strategy.  By laying out the cash flows, and expected asset values you can get a feel for various economic parameters such as:

  • Net present value comparison of various strategies
  • Rate of return
  • Sensitivity to various economic parameters such as interest rates and inflation
  • Affordability or liquidity risks

I put together a budget of various shelter scenarios:

  • Renting
  • Renting and Investing the Difference
  • Buying
  • Investing

I hope you find this budget useful as I believe having a well laid out plan is extremely important.  Having a solid budget in place will create long term value for investors and create a successful financial environment for your family.

I strongly encourage people to come up with their own budgets, and perform due diligence before making any investment decision.

The budget excel spreadsheets that I came up with are here:

( Budget – Office 2000 version \ Budget -Office 2007 version )

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Comments»

1. Another Albertan - August 28, 2008

You might want to […]
Thanks for the tip. 😉 – Radley77

2. Bob - September 5, 2008

Love the idea of the spreadsheets. Lots of sites have rent vs. buy calculators, but there are 2 features that I have always wanted and never seen:

1) The ability to divide the house appreciation rate into more than 1 time period. For example, I’d like to be able to input a rate of -3% for the next 5 years, followed by +3% for the remaining period. Having 3 possible periods would be perfect.

2) The ability to include rental income from a basement suite into the calculation. To be really useful, I suppose you would also need to be able to input an initial capital cost for basement suite renovations.

Great blog!

3. warrennbuffett - September 29, 2008

Good one and informative.

4. DavidT - August 4, 2009

Great idea posting the spreadsheet, but you may wish to share it in a different way so people can interact with it online. May I suggest uploading it to Google Docs.


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