株式会社ジェイ・ティ・アドバイザーズ
REIFA Lite
Discounted Cash Flow (DCF) analysis is one of the most useful economic decision-making tools in investment management.
REIFA Lite is a real estate investment analysis application based on DCF analysis method.
With REIFA Lite you can set multiple parameters and review analysis results with various performance ratios/values, cash flow tables, and charts/graphs for the investment.
It helps you determine whether the investment is worthwhile and profitable immediately.
Calculation of performance ratios/values (see definition below)
REIFA Lite calculates the following performance ratios/values:
- NOI(Net Operating Income)
- Cap Rate(Capitalization Rate)
- ADS(Annual Debt Service)
- BTCFo(Before-Tax Cash Flow from operation)
- ATCFo(After-Tax Cash Flow from operation)
- BTCFs(Before-Tax Cash Flow from sales)
- ATCFs(After-Tax Cash Flow from sales)
- LTV(Loan to Value)
- FCR(Free and Clear Return)
- k%(Loan Constant)
- CCR(Cash on Cash Return)
- Leverage Position
- DCR(Debt Coverage Ratio)
- BER(Break Even Ratio)
- NPV(Net Present Value)
- IRR(Internal Rate of Return)
- Payback Period
RSS Reader function
REIFA Lite has an RSS Reader function.
You can read RSS feeds from HOME'S (http://toushi.homes.co.jp) for investment analyses, but please make sure that the feeds are only available in Japanese.
Fixed values
In REIFA Lite, some values are fixed as follows:
- Loan payment method is 'Equal Payments'.
- Property holding period is 5 years.
- Standard value of DCR(Debt Coverage Ratio) is 1.30.
- Standard value of BER(Break Even Ratio) is 70%.
Please contact us
We are looking forward to your feedback and welcome any comments or suggestions.
please contact us at: reifa@jt-advisors.com
Disclaimer
This application is made available to you as a self-help tool for your independent use. We do not guarantee its accuracy or applicability to your circumstances. This application is not intended to provide investment, legal, tax, or accounting advice. All examples are hypothetical and are for illustrative purposes and we encourage you to seek personalized advice from qualified professionals regarding all personal finance issue.
Glossary
ADS(Annual Debt Service)
ADS＝Annual Principal Payment＋Annual Interest Payment
ADS is the total amount of all principal and interest paid on all of the property's loans throughout the year.
ATCFo(After-Tax Cash Flow from operation）
ATCFo＝BTCFo－Income Tax
ATCFo is calculated by subtracting Income Tax from BTCFo(Before-Tax Cash Flow from operation).
ATCFs(After-Tax Cash Flow from sales）
ATCFs＝BTCFs－Capital Gain Tax
ATCFs is calculated by subtracting the amount of tax liability incurred on the sale from BTCFs(Before-Tax Cash Flow from sales).
Capital Gain is calculated as follows:
Book Value at Sales Date＝Purchase Price－Cost Recovery
Capital Gain＝Sale Price－Book Value at Sales Date
BER(Break Even Ratio)
BER ＝ (OPEx+ADS)／GPI
BER is calculated by dividing OPEx(Operating Expenses) and ADS(Annual Debt Service) by GPI(Gross Potential Income).
It is expressed as a percentage, the lower the better. It is used by lenders to assess risk in lending the property.
BTCFo(Before-Tax Cash Flow from operation）
BTCFo＝NOI－ADS
BTCFo is calculated by subtracting ADS(Annual Debt Service) from NOI(Net Operating Income).
BTCFs(Before-Tax Cash Flow from sales）
BTCFs＝Sale Price－Cost of Sale－Loan Balance
BTCFs is calculated by subtracting the remaining loan balance and cost of sale from the net sale price.
Cap Rate(Capitalization Rate)
Cap Rate＝NOI／Property Value
Cap Rate is the ratio between NOI(Net Operating Income) and the current market value of the propety.
CCR(Cash on Cash Return)
CCR ＝ BTCFo／Equity
CCR is calculated by dividing BTCFo(Before-Tax Cash Flow from operation) by Equity investment. It is a method to determine how“efficiently”capital invested in the property is used.
DCR(Debt Coverage Ratio)
DCR ＝ NOI／ADS
DCR is calculated by dividing NOI(Net Operating Income) by ADS(Annual Debt Service).
EGI(Effective Gross Income)
EGI＝GPI－Vacancy & Bad Debt Allowance＋Other Income
EGI is calculated by subtracting vacancy and credit losses from GPI(Gross Potential Income).
FCR(Free and Clear Return)
FCR＝NOI／Total Invested Capital
FCR is the potentila return the property assuming no debt financing.
GPI(Gross Potential Income)
GPI is the total potential income of the property before any credit or vacancy losses.
IRR(Internal Rate of Return)
IRR is the compound rate of return that generates a zero NPV(Net Present Value) for a series of future cash flows.
If IRR＞Discount Rate, the investment is considered worthwhile and profitable.
k%(Loan Constant)
k%＝ADS／Loan Amount
k% is calculated by dividing ADS(Annual Debt Service) by Loan Amount.
k% depends on the interest rate of the loan, the loan term.
Leverage Position
Positive leverage describes the situation in which borrowing helps increase the return of the investment compared to the return that would be achieved if the investor did not use any borrowed funds for acquiring the property.
LTV(Loan to Value)
LTV＝Loan Amount／Property Value
LTV is calculated by dividing the amount of a loan by either the sale price of the property or the property's appraised value.
NOI(Net Operating Income）
NOI＝EGI－OPEx
NOI is calculated by subtracting OPEx(Operating Expenses) from EGI(Effective Gross Income).
It is used with Cap Rate(Capitalization Rate) to determine the value of a property.
NPV(Net Present Value)
NPV is the sum of all cash flow over a number of periods plus the projected sale price discounted at a rate that reflects a financial goal, less the original acquisition cost.
If the resulting value is negative, the investment is generally unacceptable, but if positive, the investment may be considered worthwile and profitable.
OPEx(Operating Expenses)
Operating Expenses mean expenses that must be paid by the owner to operate and maintain the property.
Operating Expenses include property taxes, property insurance, utilities paid by the owner, maintenance and management, but the principal and interest of the loan payment are not included.
Payback Period
Payback Period is the length of time required to recover the cost of the investment.