Worked Examples

Single Unit House 129 Royal Street, Buffalo, NY

Sale Price $28,500
Extra Closing costs (legals etc) $1500
Total Cost $30,000

Rent $600 per month
Monthly Costs $132.50
Net Rent $427.50
Gross/Net Yield 25%/18%

30% LTV at 10% interest, no capital Growth over 5 years, Rent static.

Total Investment 70% of $28,500 = $19,950 + $1500 closing costs = $21,450

Return Year 1 -5 = 5 x ( 18% of $28,500 – (10% x 30% of $28,500) )= ($5,130 – 855) x 5 = $21,375

Return over 5 years = $21,375/ $21,450 = 99.6%

30% LTV at 10% interest, 5% capital Growth p.a, Rent rising 5% p.a.

Total Investment 70% of $28,500 = $19,950 + $1500 closing costs = $21,450

Return Year 1 = (18% of $28,500) + (5% of $28,500) ) – $855 loan interest = $ 5,700

Return Year 2 = (18% of $29,925) + (5% of $29,925) ) – $855 loan interest = $ 6,028

Return Year 3 = (18% of $31,421) +(5% of $31,421) ) – $855 loan interest = $ 6,372

Return Year 4 = (18%% of $32,992) +(5% of $32,992) ) – $855 loan interest = $ 6,733

Return Year 5 = (18% of $34,641) +(5% of $34,641) ) – $855 loan interest = $7,112

Total Return after 5 years = $5,700 + $6,028 + $ 6,372 + $6,733 + $7,112 = $31,945 / $21,450 = 149%

60% LTV at 10% interest, 5% capital Growth p.a, Rent rising 5% p.a.

Total Investment 40% of $28,500 = $11,400 + $1500 closing costs = $12,900

Return Year 1 = (18% of $28,500) + (5% of $28,500) – ( 10% x 60% of 28,500) = $ 4,845

Return Year 2 = (18% of $29,925) + (5% of $29,925) – $1710 loan interest = $ 5,173

Return Year 3 = (18% of $31,421) +(5% of $31,421) ) – $1710 loan interest = $ 5,517

Return Year 4 = (18%% of $32,992) +(5% of $32,992) ) – $1710 loan interest = $ 5,878

Return Year 5 = (18% of $34,641) +(5% of $34,641) ) – $1710 loan interest = $ 6,257

Total Return after 5 years = $4,845 + $5173 + $5,517 + $ 5,878 + $6,257 = $27,670 / $12,900 = 215%