Real Estate model profitability calculator (house)

Description
This model intends to estimate the annual return an investor can get from the acquisition of a real estate asset (e.g., the acquisition and rent of an apartment).

The model assumes two different scenarios: i) the asset is sold at the end of the model or ii) it is held in perpetuity.

The perpetuity model assumes that the net cash flow is growing at a constant rate (g) and these cash flows are brought to the present at an expected equity return (ke).

This model has been built for educational interest. If you aim to invest in a real estate asset, you should do more due diligence on the opportunity.

You have to populate the light yellow cells in the tab “inputs & dashboard” with your assumptions. In the same tab, you can assess the expected return and NPV of the investment.

It is very straightforward to follow the instructions and provide an easy-to-understand return. If you are aiming to invest in Real Estate as an investment (buy for rent), this tool will enable you to assess the profitability of the investment. Also, it would make no sense to buy a house if the return is negative or below your minimum return required.