Real Estate Finance Basics - PowerPoint PPT Presentation

real estate finance basics n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Real Estate Finance Basics PowerPoint Presentation
Download Presentation
Real Estate Finance Basics

play fullscreen
1 / 7
Real Estate Finance Basics
135 Views
Download Presentation
trula
Download Presentation

Real Estate Finance Basics

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. Real Estate Finance Basics Dr. Arthur C. Nelson, FAICP January 2009

  2. Not Rocket Science • Future Value • Present Value • Future Value of an Annuity • Future value of cash flow stream • Present Value of an Annuity • Present value of cash flow stream • Mortgage Constant • Loan Amortization

  3. Future & Present Value • i = annual interest rate • n = number of years • FVi,n = PV(1+i)n $1,000,000 today @ 2% interest, 10 years = • PVi,n = FV / (1+i)n $1,000,000 in 10 years @ 2%discount =

  4. Trust Fund Proceeds • $100,000 received at end of each year for being “good.” How much is it worth after 20 years @ 5% interest? • “Future Value of Regular Annuity” • FVAi,n = ANN x {[ (1+i)n – 1] / i} =

  5. Lottery Winnings • You win $1,000,000 annually for 20 years, what is the present worth @ 5% discount rate? • Present Value of Annuity • PVAi,n = ANN x {1- [1 / (1+i)n ] / I } =

  6. The Hairy Monster • $1,000,000 mortgage (first house after graduate school). What are the monthly payments @ 6% interest (jumbo loan) 30 years? • Mortgage Constant, Monthly • MCi,n = PV x { i/12 / 1- [(1/1 + i/12)n x 12]}

  7. Loan Amortization Schedule Vinnie lends you $1,000,000 @ 12%, 5 years. What are your annual payments? EOY Amount Annual Year Outstanding DS Interest Principal 0 $1,000,000 1 $ 842,590 $277,410 $120,000 $157,410 2 $ 666,291 $277,410 $101,111 $176,299 3 $ 468,837 $277,410 $ 79,955 $197,455 4 $ 247,687 $277,410 $ 56,260 $221,149 5 $ 0 $277,410 $ 29,722 $247,687