Fundamentals of Real Estate
I understand that that numbers and charts attached at the end can be daunting, but don’t fret because I will explain very carefully what it means for your specific situation and how to proceed. First of all, it is important to explicitly explain how much up front you have to put down for the initial investment. The asking price is $7,200,000 and the value is estimated at 25% of the asking price, which equates to $1,800,000. However, there are financing costs of $135,000. So, your total to have invested is $1,935,000 (as shown in Exhibit B). To valuate any investment, many things need to be considered because there are many variables that can change the overall outcome or profitability of the investment. Located in the exhibits, are different values of something we call Net Present Value (NPV). Basically, the NPV measures the profitability of an investment, and gives us criteria whether to invest or not. The following is the important part. Exhibit C shows an estimated NPV of $243,480 (after tax), which is healthy and will provide some tax shelter and income to you by the property.