Use this information to analyze weather it is better to own or rent the property with the following financing and rent options. Create an Excel Model to analyze the trade-offs. Property info Purchase price $1,000,000 Buying transaction fees: 15% of purchase price Initial rent: $85000/yr Rental growth rate: 5% Property appreciation rate: 6% Insurance: $4000/yr Maintenance: $4000/yr Expense growth: 3.5% Transaction fees for future sale: 12% of sale price Marginal tax rate: 30% Property tax: 2.0% of current property appraised value LTV: 80% Interest rate: 7% Loan Term: 30 yr Loan type: Annual pay CPM fully amortizing Tax exclusions: First $500,000 of gain on sale
Use this information to analyze weather it is better to own or rent the property with the following financing and rent options. Create an Excel Model to analyze the trade-offs. Property info Purchase price $1,000,000 Buying transaction fees: 15% of purchase price Initial rent: $85000/yr Rental growth rate: 5% Property appreciation rate: 6% Insurance: $4000/yr Maintenance: $4000/yr Expense growth: 3.5% Transaction fees for future sale: 12% of sale price Marginal tax rate: 30% Property tax: 2.0% of current property appraised value LTV: 80% Interest rate: 7% Loan Term: 30 yr Loan type: Annual pay CPM fully amortizing Tax exclusions: First $500,000 of gain on sale
Chapter16: Real Estate And High-risk Investments
Section: Chapter Questions
Problem 1FPC
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