Real Estate Investment Return Calculator |
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| Purchase Price: | $1,000,000 |
| Down Payment: | $300,000 |
| Amount Financed: | $700,000 |
| Years Financed: | 25 |
| Interest Rate: | 7% |
| Monthly Payment: | $4,947 |
| 12 Monthly Payments: | $59,369 |
| Net Operating Income: | $100,000 |
| Appreciation Rate: | 5% |
| Net Income Growth: | 5% |
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This calculator has been designed to illustrate the benefits of real estate ownership.
Oftentimes, inns are analyzed strictly from the point of view of their income.
This is only one of the benefits of real estate ownership, and it will not provide a true picture of the investment.
Here are the four benefits of leveraged real estate ownership:
- Cash Flow (income)
- Equity Build-up (the reduction in loan principal)
- Appreciation (the increase in property value)
- Tax Benefits (depreciation and capital gains treatment on sale)
This financial calculator can be used for all types of property, but we've tweaked it a little
bit so that inn seekers looking at B&B ownership can input their own criteria. It
can be used for endless "what if" scenarios, so important when looking at ANY type of investment.
The calculator can be used to model different scenarios, and addresses three out of the four benefits.
It does NOT attempt to model any tax benefit scenarios, as each taxpayer's situation is different.
Marginal tax brackets, passive versus active income categories, and basis adjustments in property values
all have an impact on this benefit of real estate ownership. To fully understand the after tax impact
of B&B ownership, we recommend that you contact a competent tax advisor.
See definitions of financial terms below the following table.
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| End Of Year |
Net Operating Income |
Net Income (After Mortgage Payment) |
Equity Build-up (Principal) |
Equity Build-up (Cumulative) |
Appreciation |
Year End Value |
Annual Rate Of Return |
Annualized Total Benefit |
Cumulative Benefit |
| 1 |
$105,000 |
$45,631 |
$10,709 |
$10,709 |
$50,000 |
$1,050,000 |
35% |
$106,339 |
$106,339 |
| 2 |
$110,250 |
$50,881 |
$11,483 |
$22,192 |
$52,500 |
$1,102,500 |
38% |
$114,863 |
$221,203 |
| 3 |
$115,763 |
$56,393 |
$12,313 |
$34,504 |
$55,125 |
$1,157,625 |
41% |
$123,831 |
$345,034 |
| 4 |
$121,551 |
$62,181 |
$13,203 |
$47,707 |
$57,881 |
$1,215,506 |
44% |
$133,265 |
$478,299 |
| 5 |
$127,628 |
$68,259 |
$14,157 |
$61,865 |
$60,775 |
$1,276,282 |
48% |
$143,192 |
$621,491 |
| 6 |
$134,010 |
$74,640 |
$15,181 |
$77,046 |
$63,814 |
$1,340,096 |
51% |
$153,635 |
$775,126 |
| 7 |
$140,710 |
$81,341 |
$16,278 |
$93,324 |
$67,005 |
$1,407,100 |
55% |
$164,624 |
$939,750 |
| 8 |
$147,746 |
$88,376 |
$17,455 |
$110,779 |
$70,355 |
$1,477,455 |
59% |
$176,186 |
$1,115,936 |
| 9 |
$155,133 |
$95,763 |
$18,717 |
$129,496 |
$73,873 |
$1,551,328 |
63% |
$188,353 |
$1,304,289 |
| 10 |
$162,889 |
$103,520 |
$20,070 |
$149,566 |
$77,566 |
$1,628,895 |
67% |
$201,156 |
$1,505,446 |
| 11 |
$171,034 |
$111,665 |
$21,521 |
$171,087 |
$81,445 |
$1,710,339 |
72% |
$214,630 |
$1,720,076 |
| 12 |
$179,586 |
$120,216 |
$23,077 |
$194,164 |
$85,517 |
$1,795,856 |
76% |
$228,810 |
$1,948,885 |
| 13 |
$188,565 |
$129,196 |
$24,745 |
$218,908 |
$89,793 |
$1,885,649 |
81% |
$243,733 |
$2,192,619 |
| 14 |
$197,993 |
$138,624 |
$26,534 |
$245,442 |
$94,282 |
$1,979,932 |
86% |
$259,440 |
$2,452,058 |
| 15 |
$207,893 |
$148,523 |
$28,452 |
$273,894 |
$98,997 |
$2,078,928 |
92% |
$275,972 |
$2,728,030 |
| 16 |
$218,287 |
$158,918 |
$30,509 |
$304,402 |
$103,946 |
$2,182,875 |
98% |
$293,373 |
$3,021,403 |
| 17 |
$229,202 |
$169,832 |
$32,714 |
$337,116 |
$109,144 |
$2,292,018 |
104% |
$311,690 |
$3,333,093 |
| 18 |
$240,662 |
$181,293 |
$35,079 |
$372,195 |
$114,601 |
$2,406,619 |
110% |
$330,972 |
$3,664,066 |
| 19 |
$252,695 |
$193,326 |
$37,615 |
$409,810 |
$120,331 |
$2,526,950 |
117% |
$351,271 |
$4,015,337 |
| 20 |
$265,330 |
$205,960 |
$40,334 |
$450,144 |
$126,348 |
$2,653,298 |
124% |
$372,642 |
$4,387,979 |
| 21 |
$278,596 |
$219,227 |
$43,250 |
$493,393 |
$132,665 |
$2,785,963 |
132% |
$395,141 |
$4,783,120 |
| 22 |
$292,526 |
$233,157 |
$46,376 |
$539,769 |
$139,298 |
$2,925,261 |
140% |
$418,831 |
$5,201,951 |
| 23 |
$307,152 |
$247,783 |
$49,729 |
$589,498 |
$146,263 |
$3,071,524 |
148% |
$443,775 |
$5,645,726 |
| 24 |
$322,510 |
$263,141 |
$53,324 |
$642,822 |
$153,576 |
$3,225,100 |
157% |
$470,040 |
$6,115,766 |
| 25 |
$338,635 |
$279,266 |
$57,178 |
$700,000 |
$161,255 |
$3,386,355 |
166% |
$497,699 |
$6,613,465 |
| Total Interest: | $784,236.31 |
| Total Payments: | $1,484,236.31 |
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Explanation of terms used in this calculator:
Net Operating Income: Often confused with other numbers,
it is derived by subtracting the operating expenses from the gross revenues.
Mortgage payments are NOT an operating expense, and will vary greatly depending upon financing factors.
Appreciation: The main benefit of real estate ownership, the increase in a property's value over time.
Equity Build-up: The cumulative principal payments that reduce the amount of the
outstanding loan. Often ignored , this benefit that comes from financing real estate can really add up over the years.
Annual Rate of Return: The total of net income, equity build-up and appreciation
added together and divided into the down payment.
NOTE: This calculator does not take into consideration the time value of money,
so it will overstate the rate of return figures. This is because inflation makes the
value of a dollar worth less over time. Because appreciation and equity build-up are not realized
until sale or refinancing of a property, their true value will be reduced by inflationary influences.
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