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Property Manager Light Ver1.0

This is my first ever program that I actually completed in 2003 while overseas. The program is a section of a spreadsheet I made many years earlier to help me budget, decide on which property would be the best to buy according to my budget and to see how my equity was building. I am my worst critic and looking over the program now, I see that it has limitations, but if I keep trying to improve it before I release it, then it will probably never happen. So it is available now and I am making improvements in the next version.

What this program does is allow you to enter data on your existing property or properties, from this data the program calculates how much money the bank will lend you to buy another property based on your Debt to Value (D/V) ratio. Staying within this ratio you will avoid being charged mortgage insurance. So if you own your own home and still paying it off, the program uses the amount you still owe (the debt) and divides it by the current value of the property (value). This is also commonly known as equity. Once you have equity in your property the program works out what the banks will comfortably lend you in theory. I say theory because you still have to be able to service the new debt, so the banks will need to be satisfied that you can do this.

Personally speaking as a family man I never took risks in property investing. I have a tight budget so any property that we bought had to be almost neutral geared or better towards positive before we would look at it and that is exactly where my program came in handy. I developed this program so I could see straight up if my budget could afford to keep the property. A good capital gain really means nothing if you simply can't afford to make the payments. My program uses this methodology to show you how much money you will need to outlay each year in cold hard cash to keep the investment every year that you plan to hold onto it. Simply put, if you are able to save $3000 a year before your purchase and the program says the property will cost you $5000 a year to keep, then you are going to struggle a little to service your debt during the year. This is pre-tax cash position, however during the year you still have to outlay the loss and wait for your tax refund to get some of it back. This program is not designed for the serious investor who wants to know all the statistical data. It is far to simple for that purpose. It does give you important information though but its sole aim is to tell you how much money it will cost you each year to own the property. You then decide whether that figure is acceptable to you.

There is also an excellent borrowing calculator in the program which is the same as the banks use. I use this calculator every time before I go into the bank to ask for a loan. I have actually on one occasion during the loan process caught the bank out, trying to overcharge me. I pointed out that they must be wrong and after checking it was found that I was correct or should I say my calculator was. Now if I did not have this handy little program I would have been paying an extra $15 a month on my loan. The calculator is available as a stand alone and can be used to calculate monthly repayments on personal loans as well.

I have used this program for many years to look at the viability of investment properties that I am interested in and keep financial info on my current portfolio. It is for the average Mum & Dad investor who would like to know just the basics about their portfolio.

What will Ver 1.0 of  The Property Manager Light do.

• Analyse property returns on one property that you are interested in buying.
• Shows Returns of % Gross, % Net but much more important the Cash Position ie. (pre tax profit/loss of owning the property each year)
• Shows D/V ratio of each property in your porfolio.
• Shows D/V ratio of the entire portfolio.
• Has a mortgage financial calculator (exactly what the banks use)
• Program allows for 4 properties. (3 investments + your own home)
• Shows you how much you can borrow without paying mortgage insurance. (The 80% rule)
•  Allows you to forecast the future by simply allowing you to manipulate your outstanding debt and Future market values of your properties, thereby changing the D/V and seeing how this change impacts your possible future borrowing.
• program caters for Line of Credit or Mortgage offset accounts and how these impact on your borrowing capacity.

There is a help file that will guide you through the process and has additional tips on investing in residential properties. (please note however that I wrote this in 2003 when property prices were half of what they are now, so all the examples given are not relevant to today's market prices, and some of the tips will be old hat, the general help files on how to use the program though are still current) All of the outdated help files will be re-written in the next version.

The following screenshots are from Windows Vista and are 75% of actual size. Known Bugs.

	In the scenario screen, information about the property you are interested in is entered into the fields. Most of the info you will get from the selling agent but some will require guesstimation. When Calculate is pressed the Statistical results are then displayed in red. The cursor is repositioned in the 1st field for further amendments if required or you can clear all fields and start again. The second field (purchasing costs) list button will bring up the screen below. Some data will be auto entered if you have set up preferences. The little green calculator brings up the mortgage calculator. I have just added text below the Cash Position but have not taken a recent screenshot. The text reads 'Cost to own each year' This just helps to clarify what the Cash Position amount means.
	This screen shows purchasing costs. Enter as much as you can to get the final costs associated with the purchase. The total is copied to the purchasing costs field. This is helpful if you need to total these costs and add to your borrowings. However this amount will only affect the % Gross and Net figures when calculated. It does not affect the cash position calculation as it is either a one off cost or you will incorporate it into the loan.
	When you get to loan repayments press on the green calculator button to calculate your monthly repayments on your loan. You can choose either P&I or Interest only. Pressing finished will copy the amount into the field for you. The calculator is also available as a stand alone within the program on the menu bar of the main program screen.
	Adding properties is simple. There is a radio button to indicate if this property is your own home. The program will lock you out of entering info into the investment section if you indicate it is your own home. Your own home is used only as equity for your borrowings. Once you enter info into the top three fields, press the Add button. Number of Properties will increase by one and you are returned to a blank form to add more properties if you have them. These must be investment properties of course as you can't have two own homes.
	While you are here you can keep adding further properties if you have them. For investment propertes a little extra information is required for use in other parts of the program. As you already own the property you should know your purchase costs and monthly repayments.     As your circumstances change eg. you put the rent up, the rates change etc or the valuations have changed, you will need to come back here to amend the numbers and re-calculate. The Add button will change to a Save button when you come here via the edit menu.
	The Portfolio screens show you all your properties and their respective debts and values. Your debt to value ratio is shown as % borrowed. The amount you are able to borrow without paying mortgage insurance is your debt to value ratio represented as a dollar amount which reduces to zero when your D/V ratio equals 80%. I would like to add here that the bank will still lend you up to 95% of the valuation of your property as long as you can service the debt. However as soon as you pass the 80% mark you will be charged mortgage insurance which is the banks safety net should the loan default. I always detested this charge and I would never borrow if I did not have sufficient equity. It is all well and good to know that you can buy another property worth 725K, but can you afford it. Back to the scenario calculator to find out.
	If you leave the line of credit field empty in the preferences, then it will not appear on this screen and you can now see how much extra you are able to borrow. You see, the bank sees the line of credit as a permanent debt and it affects your borrowing capacity.   Clicking on Change Data will allow you to change every field so you can forecast what the numbers might be in the future thereby seeing the result as how much more you can borrow if ........ If you are considering selling your home & renting for instance, click Change data and remove your home and see if your D/V has gone over 80%. If it has you might find the bank may not allow you to sell it unless you can reduce the investment debt back to 80%. It just so happened that the example screen shot shows that selling your home left you with a perfect 80% D/V, this is also confirmed by the amount you are able to borrow which equals zero. Another what if situation I used this for once was whether I should put down 5% deposit on a new investment and borrow the balance. Instead I used this amount and paid it off my home loan. The program then showed that we could buy a more expensive property if we wanted. Remember your own home loan is rarely a tax deduction. Always pay off your home rather than using the money as a deposit on any investment. With a little experimentation you can simulate a lot of variables here to see which is a better outcome for your particular situation.
	The summary window shows you everything in one screen. From this example the most notable item of interest is that the investor is forking out $11.5K a year to hold onto the investment. This is all pre-tax, obviously if this was your situation, you will receive a tax refund because this investment is negative geared. How much you get depends on your income bracket but I would estimate that a refund of maybe $4000 would not be unreasonable to expect. Take that away from the initial cash loss leaves you out of pocket now to the tune of $7500. Each year you keep the property your refund will get less and less, because your interest on the loan will be less each year and the depreciatin will decline, but your property will appreciate more and more, well you would hope anyway.