MontiRealty

About MontiRealty

What is MontiRealty?

MontiRealty is a real estate investment analysis tool that uses advanced Monte Carlo simulations to calculate the probability of various investment outcomes. Our name is a play on "Monte" from Monte Carlo, reflecting our core methodology of running thousands of simulations to provide you with probabilistic insights into your property investments.

How We Calculate Probabilities

MontiRealty uses Monte Carlo simulation, a powerful statistical technique that runs thousands of scenarios to model the uncertainty in real estate investments. Here's how it works:

Monte Carlo Simulation Process

  1. Input Variables: We start with your property details (purchase price, down payment, interest rate, monthly rent) and your selected assumption preset (conservative, base, or aggressive).
  2. Random Sampling: For each simulation run, we randomly sample values from probability distributions for key variables:
    • Vacancy rates
    • Repair and maintenance costs
    • Capital expenditures (CAPEX)
    • Property management fees
    • Rent growth rates
    • Expense growth rates
    • Property appreciation rates
  3. Cash Flow Projection: For each simulation, we project annual cash flows over 10 years, accounting for:
    • Rental income (adjusted for vacancy)
    • Operating expenses (repairs, CAPEX, management)
    • Mortgage payments
    • Property value appreciation
  4. Metrics Calculation: For each simulation run, we calculate:
    • Cumulative cash flows
    • Internal Rate of Return (IRR)
    • Debt Service Coverage Ratio (DSCR) for year 1
    • Property values over time
  5. Statistical Analysis: After running 5,000 simulations, we analyze the results to provide:
    • Probability distributions (10th, 25th, 50th, 75th, 90th percentiles)
    • Break-even probabilities by year
    • Probability of negative cash flow in year 1
    • Probability of DSCR below 1.0
    • IRR distribution statistics

Key Metrics Explained

Break-Even Probability

The probability that your cumulative cash flows will equal or exceed your initial investment by a given year. This tells you how likely it is to recover your initial capital.

IRR Distribution

The Internal Rate of Return represents the annualized return on your investment. We show you the distribution of possible IRR outcomes across all simulations, giving you a realistic range of expected returns.

DSCR (Debt Service Coverage Ratio)

Measures your property's ability to cover mortgage payments. A DSCR below 1.0 means the property doesn't generate enough income to cover debt payments. We show you the probability of this occurring.

Cash Flow Quantiles

We provide percentile ranges (p10, p25, p50, p75, p90) for annual and cumulative cash flows. This shows you the range of possible outcomes, from conservative (p10) to optimistic (p90) scenarios.

Why Monte Carlo?

Traditional real estate analysis often relies on single-point estimates or simple "best case" and "worst case" scenarios. Monte Carlo simulation provides a more sophisticated approach by:

  • Modeling the inherent uncertainty in real estate investments through probability distributions
  • Running thousands of scenarios to capture the full range of possible outcomes
  • Providing probabilistic insights rather than deterministic predictions
  • Helping you make more informed investment decisions by understanding both the potential upside and downside risks

Assumption Presets

MontiRealty offers three assumption presets that adjust the probability distributions for key variables:

  • Conservative: Lower appreciation rates and more cautious assumptions about rent growth and expenses
  • Base: Moderate assumptions representing typical market conditions
  • Aggressive: Higher appreciation rates and more optimistic assumptions about growth

You can customize these assumptions after running an initial analysis to see how different scenarios affect your investment probabilities.