Number crunching with Krunching.com

Posted by: Chris Palmeri on May 7, 2009

I’ve said from time to time I’d like to profile some real estate related Web sites. Here’s one I found recently Krunching.com. The site was founded by Time VanDermyden, a real estate broker who says most agents don’t have a clue how to analyze investment properties. I take a slightly different position than Tim. (That’s him the photo). I think Realtors do know how to analyze homes from an investment perspective, but they don’t because if they did most homes would look like lousy investments.


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Residential properties tend to sell for higher prices per square foot than retail or office buildings. That’s because the people who buy commercial property are calculating the purchase price based on what they earn back on the property. The banks that lend to them are also doing so based on the rent the property can generate. With homes it’s a different model. A house is an emotional purchase, not an economic one. A mortgage loan is backed by the income of the borrower. You make your money when you sell, years down the road.

Enough me blathering, VanDermyden’s idea is to analyze homes based on their projected rent. He launched the site a year ago and right now the data is just for California but VanDermyden says he hopes to roll it out for other states where foreclosures are running high and investors are swooping in. The service costs $39 a month, although some of the analysis can be found for free on the Web if you Google a particular address.

Krunching gives you data you won’t find on most other sites such as who the owner of the mortgage is, what the interest rate on the loan is and when it’s due. This can be useful if you’re negotiating a short sale and you want to see how desperate the bank or the owner is. The other key piece of data is the estimated rents for the market. With tools on the site you can calculate projected rents, management fees, operating costs and vacancies and give yourself an estimate for cash flow. Krunching.com then gives you a thumbs up or down on the property as an investment.

Although a subscription to Krunching.com may not be for everyone, I give VanDermyden a thumbs up for the concept!

Reader Comments

Ballbuster

May 10, 2009 3:44 PM

As to owning residential property, Palmeri claims that "You make your money when you sell, years down the road." In effect Palmeri is stating that a home owner will received a lump sum future payment equivalent to a series of deferred "rent" whereas a commercial real estate owner receives a series of monthly rent from his lease contract. Without distinguishing the difference between the two payments, Palmeri is either confused or conniving. Profit from rent is based on a legal contract whereas profit from an expectancy is based on a prayer. Many Flippers with foreclosed houses or upside-down mortgages made the same mistaken assumption as Palmeri: You make your money when you sell, years down the road. Has Palmeri already forgotten the recent real estate bubble where purchase price was based on future expectancy instead of rent value? While Palmeri acknowledges the businessmen's wisdom of using projected rent as the bases for buying commercial real estate, he claims homeowner’s emotional purchase will be profitable because “You make your money when you sell, years down the road.” Why is Palmeri suspending present worth-future value calculations for residential real estate and not to commercial? The truth is that Palmeri is playing “ Hide the Ball.” Palmeri is concealing the truth that both commercial real estate and residential real estate should be priced using projected rent values. The recent great American real estate bust is a proof that too many home buyers had made an emotion purchase, based on greed instead of rent value, hoping to make a big future lump sum profit when he sell down the road. As a side note, it is not understood why Palmeri is brown-nosing Vandermyden when pricing real estate based on projected rent is the logical and prevalent method outside of the real estate mania. Palmeri admits as much when he states similar analysis is freely available in the Web.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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