Tools of The Trade – Analyzing Investment Deals


By Alec Pacella, CCIM
Managing Partner at NAI Daus
(216) 455-0925
Twitter @dausyouknow

I always appreciate when readers of this column take the time to reach out to me. Sometimes I know the person and sometimes I don’t but regardless, it is certainly always a delight to hear your comments. Last month, while at a real estate event, I was engaged in a discussion by a reader. This particular individual had one pressing question. No, they didn’t want to know about my favorite ‘80s-era supercar (512 Testarossa) or how my Aunt Norma made her lasagna (old Italian women never reveal their exact recipe). This avid reader simply wanted to know what software I used to analyze investment deals. Simple question, not so simple answer – but it was asked so I’m obligated to answer.

Financial calculator
Although technically not software, it is an invaluable tool. I’m partial to the Hewlett Packard 10B but there are many alternatives available from calculator giants such as Texas Instruments and Sharp. Financial calculators have a few significant benefits. They are very powerful and capable of performing all sorts of financial calculations in seconds. Despite this power, they are very affordable. Most cost less than $50 and iPhone and Android emulator apps are available for even less. And they are extremely portable. Calculators can be stashed in the pocket of a sport coat, purse or briefcase and used quickly and easily in a variety of settings. If you are using an app on your phone, there is an even greater chance of having this powerful tool at your fingertips. However, all of this portability and affordability comes at a cost – namely, functionality. While determining the IRR of a series of cash flows will take just seconds, determining that series of cash flows will involve countless calculations, probably with a good dose of old fashion pencil and paper thrown in. And good luck if someone asks you to email the analysis to them.

Microsoft Excel
I use Excel more than any other tool, as it offers many significant advantages. At the top of the list is flexibility. Excel can handle anything from a single-tenant cap rate analysis to a multi-tenant discounted cash flow analysis to a tenant occupancy costs analysis. In many ways, the software is only limited by the underlying skills of the user. Financial calculations, such as IRR, NPV and loan functions are inherent. It’s easy to build templates that can be used and re-used without having to re-create the proverbial wheel each time. And it’s universal, so I can send the analysis to someone without worrying about them having difficulty in opening the file. Click here to continue reading entire article.


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