I have taken a bit of time off in posting to undertake a refresher in some of the basics of real estate investment and finance. I have taken a few college level courses and hang on to one of the better texts on the subject, entitled “Real Estate Finance and Investment” by Brueggeman and Fisher. The book is pretty much an A-Z course on core concepts within real estate Finance and Investment. My ultimate goal was to become re-acquainted with my financial calculator.
If you are contemplating real estate investments or need to work through various financial scenarios, the financial calculator can be your best friend; if you have the skills to use the various functions on it. I admit that I was getting rusty on its use and it was gathering dust in my study. After reviewing the basic chapters on financial calculations and downloading the manual that came with my TI BA 35, (lost the original) I was once again able to solve most of the financial questions that can come up when considering real estate finance calculations.
The subject matter in most computations involve solving for value (future or present), time (typically in years or months), cost of finance (expressed as interest) and computing payments. Armed with the financial calculator and basic understanding of the above variables will allow you to solve for X, X being the answer to any question you may have regarding real estate finance. I have used this knowledge to verify refinance claims from lenders, ‘you could save $350.00 a month by refinancing your current mortgage with us at an APR of 3.85% on a 25 year loan…’ Depending on your current cost, (interest rate), remaining principal (present value) and time left on original loan, this savings may in fact cost thousands of dollars in overall payments compared to simply riding out the remainder of your current mortgage.
The subject of financial calculations can be very dry/boring, but it is an essential skill to acquire in understanding which investments are sound and what the financial burden will be for the investor. Without the ability to solve basic financial calculations, you are just accepting the word of the financial community. Good luck with that!