Now, let’s talk about the most important tool in your toolbox, as an investor or real estate professional or financial professional: namely, the financial calculator. It’s really important to learn how to use a financial calculator and to understand the concepts with which you use it because, without it, you’ll truly be at a huge disadvantage, as compared to others who can. And, certainly, if you want to be taken seriously as a finance or commercial real estate professional, you definitely need to know how to use this tool.
First, you’re going to see hundreds, if not thousands of deals throughout your career. And each one of those deals is going to have data and information which are presented to you in different and unique ways. It’s not always going to be nice, clean, and easy to understand.
Sometimes, you’re going to have to do analyses, on the fly, just to get the numbers you need and, perhaps, metrics for calculating certain essential things. But the point is that you’re not always going to have the ability nor the time to plug numbers into a spreadsheet model or into some proprietary software system. And you have to understand both concepts and how to use the concepts, right there in real-time.
So, when we’re talking about a financial calculator, we’re specifically talking about calculators that include the five time-value functions, the number of periods, rate, present value, payment, and future value. Most of these calculators do a whole lot more than that, but, for real estate finance and investments, this is primarily what we’re going to be focusing on.