How does the Residential Proforma spreadsheet help in making informed real estate investment decisions?

The projected sales price in the Residential Proforma spreadsheet plays a crucial role in determining the total revenue that can be expected from the sale of the property. It provides the full number or the total amount that can be gained from the property sale. This is particularly important as it allows investors to understand the potential return on investment and make informed decisions. It's also used to calculate the cash flow, cash yield, or Internal Rate of Return (IRR). If these values are negative, they will show up as red, indicating a potential loss.

The Residential Proforma spreadsheet accounts for inflation and rent increases by adjusting the financial outlook over a ten-year period. This means that the projected revenues, costs, and other financial metrics are adjusted to account for expected changes in the value of money and rental income over time. However, the specific method of accounting for inflation and rent increases may vary depending on the assumptions and calculations used in the spreadsheet.

A negative cash flow, cash yield, or Internal Rate of Return (IRR) in the Residential Proforma spreadsheet indicates that the real estate investment may not be profitable. Negative cash flow means that the expenses are higher than the income generated by the property. A negative cash yield suggests that the return on investment is negative, implying that the investor is losing money on the investment. A negative IRR indicates that the present value of future cash flows is less than the initial investment, suggesting a loss on the project.