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Estimate Maximum Purchase Price

Our Max Purchase Price tool (available in the Max Price tab) lets you quickly estimate how much you can offer for a property in order to achieve your desired profitability using the following financial metrics: capitalization rate, cash on cash return, cash flow (year 1) and internal rate of return (IRR).

Running the analysis is easy and only requires 2 parameters for each table :

  • Mid-Value: represents the central value of the table
  • Interval: defines the increment / reduction in targeted profitability for that particular financial ratio

To run the analysis, simply click on the “Run Simulation” button at the top of the sheet.

The analysis will return a range of potential purchase prices that reflects the equivalent range of desired profitability.

In the exemple above, the table tells us that the max purchase price we can offer for the property is $5,553,700 in order to achieve a 10% cap rate. This ratio would decrease to 8.5% if we increase our offering price to $6,577,900. Alternatively, should you target a ROI between 11.5% and 14.5%, you know that your max offering price should range from $3,752,500 (14.5%) to $4,796,700 (11.5%) approximately.

More generally, this tool offers a great way to see how much changes in offering price impact your profitability and  identify a range within which your offer should land.

Results from all 4 tables are then consolidated into a summary graph which lets you quickly identify what price range matches the financial thresholds of multiple financial metrics.

Updated on September 11, 2021

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