FINA 210 Lecture 7: Lesson 7
Document Summary
After completing this lesson you will be able to: Calculate returns on investments (roi) or returns on equities (roe) Definition: the purpose of investment decision criteria in real estate is to quantify certain measures in order to compare them to a predetermined benchmark or to rank properties according to the decision criteria of choice (i. e. payback). Ultimately, using these tools will facilitate the decision-making process. There are several formulas we use to evaluate real estate investment. Some are simple (rules of thumb approach) and can be calculated quite easily using a basic calculator; others are more complex and require a financial calculator or a scientific calculator. In this course we will use the rules of thumb techniques. The real estate income statement is a tool that will assist you in calculating net income. Multipliers (nim), gross income multipliers (gim), and overall capitalization rates. It is also very helpful in determining the cash flow after taxes (cfat) on assets.