Ramen Retirement: Yield vs. Growth Comparison
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Ramen Retirement: Yield vs. Growth Comparison
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Property Purchase AssumptionsProperty ProjectionsFinancial Results
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Purchase price$1,000,000YieldGrowthIRRCumulative Cash flowCapital gains
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Interest rate4.50%
Rent as % of purchase price
0.77%0.45%
Hold period
YieldGrowthYieldGrowthYieldGrowth
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Down payment25.00%Monthly rent $$7,700$4,5005 Year23%23%$148,703-$3,226$168,352$405,200
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Down payment$250,000Annual rent$92,400$54,00010 Year21%21%$378,270$111,408$416,595$1,125,208
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Loan$750,00015 Year20%19%$704,894$399,359$714,444$2,182,241
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PMT$46,044Purchase cap rate7.00%3.80%20 Year20%19%$1,147,908$941,130$1,071,522$3,728,180
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Interest$33,750Implied costs$22,400$16,00030 Year20%19%$2,479,901$3,304,899$2,011,409$9,260,141
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Principal$12,294NOI$70,000$38,000
Notes & considerations:
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Does not consider tax impact of cash flow versus capital gain
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First year cash flow$23,956-$8,044
Does not account for potential refinancings to free up capital for reinvestment
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First year cash on cash %9.58%-3.22%
Rental growth rates 2012-2017 - high income & growth markets:
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San Francisco-7.4%; Seattle-6.9%; Denver-6.9%; Austin-4.4%
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Rent growth %3.50%7.50%
Rental growth rates 2012-2017 - slow & steady markets:
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Cost growth %2.00%4.00%
Kansas City-3.5%; Cincinnati-3.1%; Indianapolis-2.5%; Louisville-4.7%
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Rent to cost spread1.50%3.50%
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Sale cap rate7.00%3.80%
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Source: Ramen Retirement - Ramenretirement.com
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