MBS - Property Manager Lite 2 Page

www.software.mbs.id.au

Property Manager Light V2.0

OK, the bad news is, I have bit off more than I can chew at the moment. For those that have been here previously and read this section, will notice the changes, but in essence, what I am going to do is finish V2 as it is now. I will develop the final phase of improvements into V3.

This program now encompasses a large 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 along with total expenses for each property. 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 and also will possibly avoid over committing yourself. 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. The banks will still lend you money to buy investments even if you have no equity, but you will be slugged with mortgage insurance.

Personally speaking as a family man I never took risks in property investing. I have a reasonable budget and like to keep it that way 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 flow, 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 for the Mums and Dads, just like me who aren't high flyers, have a reasonable budget to work with and just want to invest to make a nest egg for themselves in the future with relatively low risk.

In Summary - The program currently has three sub programs:

A Scenario program that is very useful in determining what a property purchase will cost you. It allows you to view up to ten properties. You can compare them in a list and weed out the ones that are not so attractive when compared to others you are looking at. This programs sole aim is to tell you how much money it will cost you each year to own the property and whether your budget can accept the extra liability. You then decide whether that figure is acceptable to you.
A Portfolio program that you keep data on your current properties which includes your own home if you have one. From this, the program tells you your current equity you have and this allows the program to show you what you can borrow to buy more properties. It uses the 80% equity rule that almost all banks follow. However this rule can be ignored because the banks under certain circumstances will lend money outside of this rule, however there is a penalty to pay for this and it is called mortgage insurance. So if you borrow more money than this program says you can, then you will pay this insurance.
A Budget Estimator, the new addition to this version. Now you can see how each scenario will impact on your budget and also how changes to your current investment properties affect your budget as well. Accurately setting the budget up at the start will ensure that you are well informed on your financial situation before you go and decide to add another property to your portfolio.

Everyone's circumstances are different. For me it was a case of we had our own home first and waited ten years before we had enough equity to start looking at investing. From there, over the next ten years we built up to four investments. Sold a few and purchased a few. I didn't have property manager back then but I had my spreadsheet which is where Property Manager originated from. You don't have to have your own home to start investing although PML as a program is inclined towards you having a home as a starting point for equity purposes, but this is not necessary to take advantage of the information the program offers 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 caught the bank out, trying to overcharge me once. 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. The calculator is available as a stand alone in the program and can be used to calculate monthly repayments on personal loans as well.

What can this program do.

New. Analyse Scenario property returns and Cash Flow on prospective properties you are looking at side by side.
New. At a glance see how purchasing any of the properties will affect your budget
New. Can now save ten scenario's for future retrieval.
Shows Returns of % Gross, % Net but much more important the Cash Flow ie. (pre tax profit/loss of owning the property each year)
Shows D/V ratio of each investment property in your porfolio.
Shows D/V ratio of the entire portfolio, includes own home if you have one.
Has a mortgage financial calculator (exactly what the banks use)
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.
New. Compound interest financial calculator.
New. Budget Estimator is now included. It is tied in with your portfolio & also updates each scenario that you have saved.
Improved. Program now allows for 5 properties. (4 investments + your own home)
New. Now you can easily swap properties around with a click of a button.

The following screenshots are Windows Vista and are 75% of actual size and heavily compressed. All data in the examples are fictitious.

	This is the new scenario screen, I have come up with. I have added several extra fields to the top section of the card. 195 characters of free text should be ample room to describe the property. I have changed from using the terminology of Cash Position to Cash Flow. I have also broken the Cash Flow down to Monthly for a different perspective. The extra information you have to enter will make it a little easier to compare properties. There is a limit of 10 scenarios that can be saved and viewed. A new section called Affordability has been added and is tied to the Budget Estimator. To take advantage of this you must first complete and save your budget. The funds you have available will then display. The impact on your budget will show you the balance of your budget if you decided to purchase the property. If you change your budget and then look at the scenario again you will see that the affordability figures will reflect the changes. Even previously saved scenarios, when opened for editing or viewing will show the updated affordability figures. In this case of the screen shot, you can see that the budget can just support the purchase of this property. Current cashflow available cannot be negative. Pressing the list button next to the Purchasing Costs field, brings up this card. Just a convenient way to add up all the incidentals that accumulate to the purchasing costs. This card is saved in conjunction with the main card. When you return to edit the main card your purchasing costs are retained so you can edit them as well.

From this screen you will be able to compare all the properties you have an interest in. Comparisons will show the important information you need to compare to make an informed decision. You will be able to edit, delete, add to the list or purchase the property. The properties are sorted to show the best cashflow at the bottom of the list. Your budget surplus is also shown for reference. As you can see, only two properties are viable propositions to purchase within the budget. The top two are just under and over the budget and if purchased would put a strain on the budget if interest rates went up.
The little notepad in the top right corner will show the Property description text of the highlighted property. This saves you having to View/Edit the original card to see this description. Of course you may view the original card if you wish and make corrections to it, if something has changed.

If you decide to buy the property, just highlight it and press Buy Property button. All the info you entered on the scenario card is copied to the Add Investment card. In this particular case, there is an own home so it must be an investment that will be purchased. If there is no own home and you have less than four investment properties then a screen will come up asking you if you plan to buy the property as an investment or own home. The corresponding card will appear for you to fill out and save. The current and future values are set at the purchase price of the property. Now you can fine tune the figures as they will most certainly have changed slightly, add your purchase date and then press the recalculate button and the stats for your newly purchased property will be calculated and shown. Then it's just a simple matter of Adding it to your portfolio. Adding your current investment properties to your portfolio uses the exact same screen.
	Easily view and edit your portfolio. Every time you need to change something eg. rent variation, expenses, property valuation or current debt you can access your portfolio from here and make the changes. The original card where you added the property will be your edit window as below.
	Every now and then you will need to update your investment portfolio. This is the Edit portfolio card and is identical to the Add investment card except for button name changes. You will change your current debt as you pay off more principal from the loan and increase your market value over time, this of course will increase your equity in the property. Rent will change periodically as well as expenses. The current debt and current market value are used to calculate your equity and borrowing in other parts of the program. Whenever you add or edit investment properties to your portfolio, the budget is automatically updated as well, with the new income and expense figures copied to the budget. I have added agents commission to this card so that you have the ability to change it just in case you have different agents charging different commission rates.
	The stand alone calculator has changed slightly. There is no radio button to choose P&I or Int only. They are now both shown. I have changed the calculator in the scenario screen slightly too. When you get to loan repayments press on the green calculator button to calculate your monthly repayments on your loan. Make a choice and copy which one you want. It is interesting to see that out of the monthly payment, only $420.55 comes off the balance in the early stages of the loan. Where does the $1458.33 go? No wonder it's hard for families to get started in their own home, let alone an investment. It seems like an insane amount of money to pay each month in interest to have your own home. The higher the interest rate the worse it gets.
	I have now added a compound calculator to the menu.
	Viewing your portfolio is almost the same as version 1, but allowing for one more property. This screen shows you all your properties and their respective debts and values. Your debt to value ratio is shown as Equity & D/V ratio. The amount you are able to borrow without paying mortgage insurance is your debt to value ratio represented as a dollar amount which is equal to 80%. In other words if you borrowed 390K and added this property to your portfolio, then your equity would be 80% and the amount you will be able to borrow will be zero. Clicking on Change Data will allow you to change the numbers so you can forecast what your likely financial situation will be in respect to equity and borrowing potential. Your original data is untouched and is not affected by any changes you make while in a Change data session.
	Here you can see that if you have a line of credit, how much it affects your borrowings. The line of credit is seen as a permanent loan regardless if you have used it or not. The line of credit is set up in the preferences screen.
	In this example the own home has been sold. However the banks would not be impressed because the D/V has gone over the 80% limit. They would expect the debt to be reduced by $22,000. This can be done by reducing the max of the line of credit to $48K or just pay off the amount from one of the investments. This payment will bring the D/V down to 80% and of course means that your borrowing capacity will be zero. This is only if you want to avoid the mortgage insurance. otherwise if you find a good investment you can afford giving good returns then there is no reason the banks won't lend you the money. NOTE: just because your equity goes over 80% does not mean you can't borrow money. What it means is that you will pay mortgage insurance before the banks will lend you any money.
	I have now made own home a separate entity. I have added several extra fields that may seem impractical at this time, however they are there for the purpose of having this information copy across to the investment section of the program should you ever decide to make your house a rental. The bare minimum required on this card is the Current Debt, Current Market value and property name, otherwise the property will not be saved. The property name defaults to Own Home. However you can change it if you wish.
	This made life a little easier because I have been through the cycle of moving from one to the other. It covers all situations. 1)Own Home to Investment Rent out your own home & move into a rental yourself or move back home with the parents. If you filled out all the fields in your own home then you won't have as much to enter in the add an investment window. 2) Swap Properties Move into one of your investments and rent out your original home. If you turn your own home to an investment, the add investment property screen will appear for you to fill in the investment data. 3) Investment to Own Home You have been renting & decide to move into one of the investments. If you move into one of your investments after being in rental properties the process is auto and no input is required.
	The summary card, shows all the stats on one page so you don't have to go through a stack of other screens to find your stats.
	There are only a few preferences that can be set. Makes life simple.
	This is the opening screen of the Budget Estimator. I use the universally accepted budget method of envelopes. To save space all the rest of the screen shots belonging to this calculator are in the Budget Estimator link above. The Estimator is fully integrated and automatically updates all sections of the program where required. eg. change your investment property rental income and the budget is updated without you entering the budget income envelope. This then updates the budget cashflow and this is reflected in the affordability figure in the scenario screens for you. Even saved scenarios before the change will be updated.