If you’re diving into real estate investment, the Deal Analyzer calculator from Doorbrain is an essential tool for evaluating property deals. This handy calculator simplifies the process of determining whether a property is worth its asking price based on various financial factors. In this blog post, we’ll walk you through how to use the Deal Analyzer calculator and explain the key terms involved.

What is the Deal Analyzer Calculator?

The Deal Analyzer is a user-friendly tool designed to help real estate investors assess property deals. By inputting specific financial metrics, you can estimate the ideal purchase price for a property and ensure it aligns with your investment goals.

---

Deal Inspector Calculator Variables

The Deal Inspector Calculator helps you analyze real estate deals by calculating various financial metrics based on user input. Below is a detailed explanation of each variable used in this component.

Variables Overview

Units Value

• Definition: The number of rental units in the property.
• Example: 10
• Purpose: Determines the total rental income by multiplying with the average rent per unit.

Average Rent Value

• Definition: The average rent charged per unit.
• Example: $2,500
• Purpose: Used to calculate the Gross Potential Annual Revenue by multiplying with the number of units and then by 12 (months).

Gross Potential Annual Revenue

• Definition: The total potential rental revenue generated from the property before any deductions.
• Calculation: (Units Value * Average Rent Value) * 12
• Example: $300,000
• Purpose: Represents the total income the property could generate in a year if fully occupied.

Net Operating Income (NOI)

• Definition: The income generated from the property after operating expenses but before financing costs and taxes.
• Calculation:
  • Effective Gross Income: Gross Potential Annual Revenue * (1 - Vacancy Rate / 100)
  • Operating Expenses: Effective Gross Income * (Expense Rate / 100)
  • NOI: Effective Gross Income - Operating Expenses
• Example: $150,000
• Purpose: Measures the profitability of the property by accounting for vacancy and operating expenses.

Property Value

• Definition: The estimated value of the property based on the Capitalization (Cap) Rate.
• Calculation: Net Operating Income / (Cap Rate Value / 100)
• Example: $2,500,000
• Purpose: Provides an estimate of the property's value based on its income-generating potential and the Cap Rate.

Cap Rate Value

• Definition: The capitalization rate used to estimate the property's value.
• Example: 6%
• Purpose: A percentage that reflects the rate of return on the investment based on the Net Operating Income. Lower cap rates typically indicate higher property values.

*The higher the cap rate the higher the investment risk is going to be. Always aim to sell your property at a lower cap rate than you buy.

Vacancy Rate

• Definition: The percentage of rental income lost due to vacant units.
• Example: 10%
• Purpose: Adjusts the Gross Potential Annual Revenue to reflect the income lost due to vacancies.

Expense Rate

• Definition: The percentage of revenue spent on operating expenses.
• Example: 50%
• Purpose: Used to calculate the operating expenses and determine the Net Operating Income.

User Input Fields

• Number of Units: Input field to change the number of rental units.
• Average Rent Per Unit: Input field to adjust the average rent charged per unit.
• Vacancy Rate: Input field to set the percentage of income lost due to vacancies.
• Annual Expense Rate: Input field to specify the percentage of income spent on operating expenses.
• Cap Rate: Input field to determine the capitalization rate for valuing the property.

---