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Real Estate Resources
Welcome to the AAOA Forum, where we discuss the the topics our members want to hear and want to talk about. We like to take an active roll in the online community to help our members learn and help educate landlords new and old. We encourage you to participate and join in our discussions. Thanks.
BUY AND HOLD VS. BUY AND EXCHANGE CALCULATOR
Here’s a snapshot of what the calculator can do. To order your own interactive version, contact Ken Tharp, Iowa Equity Exchange, info@iowaequityexchange.com.
First, You Input Your Assumptions:
Re: Initial Purchase
Rate of Appreciation 3.5% (Enter the % that you expect property to increase annually going forward)
Interest Rate on Debt 7.250% (Enter interest rate on loan)
Number of Payments 360 (Amortized over how many months)
Purchase Price $180,000 (What is the purchase price?)
Fair Market Value (FMV) $215,000 (What is the actual FMV)
Actual Value to Purchase (Shows the % of actual value you are paying for this property)
Price percentage 83.7%
Amount of Down Payment $42,000 (Enter is dollars, not percent)
RE: Exchange
Percentage of sale price
paid in closing costs 10.0% (What % of the selling price will go to closing costs– commissions, fees, etc.)
Equity used as _____%
down payment 20.0% (Remaining proceeds will be used as a down payment of what % of new property?)
and the calculator shows your comparisons:
BUY AND HOLD
Purchase Price $180,000
Fair Market Value $215,000
Mortgage balance $138,000
Principal/Interest pmt $941
Value Mtg Bal Gross Equity
After year #1 $222,525 $136,664 $85,861
After year #2 $230,313 $135,229 $95,085
After year #3 $238,374 $133,685 $104,689
After year #4 $246,717 $132,026 $144,691
After year #5 $255,353 $130,243 $125,110
After year #6 $264,290 $128,326 $135,964
After year #7 $273,540 $126,265 $147,275
After year #8 $283,114 $124,049 $159,064
After year #9 $293,023 $121,668 $171,355
After year 10 $303,279 $119,108 $184,170
vs.
BUY AND EXCHANGE AFTER FIVE YEARS
Purchase Price $180,000
Fair Market Value $215,000
Mortgage Balance $138,000
Principal/Interest pymt $941
Value Mtg Bal Gross Equity
After year #1 $222,525 $136,664 $85,861
After year #2 $230,313 $135,229 $95,085
After year #3 $238,374 $133,685 $104,689
After year #4 $246,717 $132,026 $144,691
After year #5 $255,353 $130,243 $125,110
SELL PROPERTY
Gross equity $125,110
Expenses of sale $25,535
Net equity $99,575
EXCHANGE INTO NEW PROPERTY
Purchase Price $497,873
Fair Market Value $594,682 (assuming this purchase is made at the same % of FMV as initial one)
New mortgage balance $398,298
New Payment 2,717
Value Mtg Bal Gross Equity
After year #6 $615,494 $394,443 $221,052
After year #7 $637,038 $390,299 $246,738
After year #8 $659,334 $385,845 $273,489
After year #9 $682,411 $381,056 $301,354
After year 10 $706,295 $375,909 $330,386
Disclaimer: This spreadsheet is for illustrative purposes only. Past history of increases in land values are not a guarantee that the trend will continue. It is typical to use past history to analyze a potential investment. Before investing, you should discuss your situation with your trusted legal and financial advisors to determine the suitability of any investment for your circumstances.
Iowa Equity Exchange, 4800 Mills Civic Pkwy, Suite 205, West Des Moines, IA 50265 515-224-5259 office, 515-223-8492 fax info@iowaequityexchange.com
Filed under: AAOA Forum, Financing
[…] The Buy and Hold vs. Buy and Exchange Calculator can estimate your gains if you hold, and compare that against an exchange. It’s interactive nature makes it easy to use to evaluate any property you may be thinking of selling, or putting an offer on. The spreadsheets can also be used to play with different market factors. For example, you can change the rate of appreciation to determine how any expected changes may affect your gains over ten years. Click here to see a sample spreadsheet. […]