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Real Estate Income Analysis Software
Investment Analyst
Not All Income Analysis Software is Created Equal

There are several so called lease by lease programs available - usually at a very high price. You will also find cheaply priced "programs" out there that claim to serve all of your income analysis needs. And you will find software programs out there whose focus is on preparing "narratives", but they throw in a quick and dirty discounted cash flow analysis or rudimentary cap rate builder into their package "to cover all of the bases."

Neither Investment Analyst nor Commercial Complete fit into any of these categories. Before you decide which income analysis software is best for you, consider these things.

Don't spend $4,000 for software that you may never use or $79.95 for software that cannot do the job

Lease by Lease Programs

Lease by lease programs are designed from an accounting perspective, not a valuation perspective. Only as a secondary function do these programs discount cash flows produced by the leases to get a "leased fee value." Often they do not consider financing in the valuation. Or closing costs. Or selling expenses. The primary function of Investment Analyst has always been to answer the question - What is this property worth, based upon income? Performing a discounted cash flow analysis is one way. Analyst does this well. But seasoned professionals know that simply performing a DCF analysis is only part of the story, and it is often not the best indicator of income value.

Usually, a stabilized analysis serves one better. At the very least, it must be considered. Even if the property has leases, Market Income and Market Expenses are often the best indicators of value. Leases can be broken - and if they vary too much from market, there is a good chance that they will be. Investment Analyst uses a sophisticated derivative of the Mortgage Equity Technique to build a cap rate that is applied to the Stable Net Income in order to determine value. Analyst then proves the cap rate calculation with a Discounted Cash Flow analysis and a Net Present Value analysis, using the same assumptions.

Lease by lease programs ignore stable income and expenses. They do not use the Mortgage Equity Technique to verify the accuracy of DCF. The design of a typical lease by lease program is awkward and confusing. You cannot immediately see the effect that data entries have upon the Indicated Value. These programs were not designed for the appraisers, investors and others interested in the value of the property. They were designed for property managers.

Look at the reports generated by other income analysis software. Is the emphasis upon what the indicated value is and what factors influence that value? Or do these programs spew out reams of paper to no logical end? You probably will have a hard time finding the value on their reports. So will your clients.

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Consider the "feel" of the screens. Do you have to enter data in scattered places on numerous input screens before you get close to an answer? We can't tell you how many users who have compared programs like Argus and Project with ours, have selected Investment Analyst. Many, even after they have made a huge investment in our competitor's product. With Analyst, there are three basic input screens: Income, Expense, and Worksheet. Investment Analyst performs complicated analyses, but it makes your job easier. Our users don't have to attend classes in order to use our products. And they do not have to use them on a daily basis to remember how the software works.

"Programs" based upon templates - BEWARE

Another category of income analysis software is based upon templates like Microsoft Excel or Microsoft Access. You need these programs on your machine in order to use the income analysis templates. Over the years, Microsoft has increased the power of their products remarkably. They are truly "programmable." As a user, you can design input screens for yourself and let Excel or Access perform the background tasks. We use both products and highly recommend them. They are especially useful to those who have some programming skills and want to customize an application for their own use or for others in their company, relatively quickly and inexpensively.

Unfortunately, these programs are also mis-used. Usually, it works this way. A talented person, like an appraiser, a CPA, or a young spreadsheet expert with "some" real estate knowledge, sees a way to apply the power of these programs to get his own work done more efficiently. He designs a "template" based upon Excel or Access that turns out to be just great. Maybe he first does an Income Statement template. Then a Discounted Cash Flow Analysis template. Then a Capitalization Rate template. At some point, he sees the possibility of selling these templates as a package to other users like himself - as an "extra" source of income for himself.

Please beware. It is one thing to design a "template" for your own use and quite another to write professional quality software that will be used by persons with various levels of computer skills, different levels of mathematical knowledge, and different levels of real estate knowledge.

Intelligence must be built in so that input errors of all kinds do not result in erroneous calculations. Input screens must be made easy to use for both the "computer challenged" and those who use computers every day. Flexibility must be incorporated that allows for different inputs, depending upon the analysis, and "smart" reports that change as the inputs change.

Ever wonder why these templates only do a 10 or 20 year analysis? It is because the designer cannot write the necessary code in a spreadsheet to allow for various holding periods. And he cannot write the code to make holding periods of various years fit neatly on the printed output page. If the software designer cannot incorporate these basic functions, do not expect much "intelligence" to be built into the product. Important checks will be missing - verifying the IRR calculation independently, using several mathematical techniques behind the scenes. Or verifying that individual income and expense entries actually "add-up." Or incorporating code that insures that spreadsheet errors have not crept into the model due to an inadvertent change in a cell somewhere deep in the spreadsheet. Or a Review Report that evaluates your input entries against a Standard.

$79.95 may look like a good deal. But if you are serious about analyzing the income of real property, you will be wasting your money.

"Narrative" Software that also performs Income Analysis - BEWARE

You may run across a software product that is designed to assist you in the preparation of your narrative. Some of these programs, as a "bonus," will build a rudimentary cap rate or perform a discounted cash flow analysis. If you are serious about analyzing an income property, don't short change yourself by accepting this kind of analysis. It is relatively easy to build a simple cap rate or to perform a DCF. But to do it correctly and thoroughly, you need Income Analysis software that looks beyond a simple mathematical formula. How income and expenses are handled under various circumstances is critical to a good analysis.

Investment Analyst is devoted to Income Analysis. We take care to incorporate the many considerations that may come up as you develop your analysis. We build in a series of checks to verify the analysis. And we build in the flexibility to analyze all types of income properties, under a variety of circumstances. You will not find the capabilities of Investment Analyst in "narrative" software.

Commercial Complete incorporates the full power of Investment Analyst. Each product stands alone, above the rest. Real Estate Income Analysis should not be an after-thought to be used only to fill the pages of a report.

Financial Masterplan, Inc.

The information contained herein is copyrighted by Financial Masterplan, Inc. No portion may be reproduced without the express written consent of Financial Masterplan, Inc. If you have purchased Investment Analyst, you may use portions of the information contained herein in your narratives with proper attribution to Financial Masterplan, Inc. and only under "fair use" guidelines.

For more information about copyrights and "fair use", we refer you to the U.S. Copyright Office web site at

Commercial Real Estate Software, Narrative Appraisals, Income Analysis, Cost Analysis