All Topics / Help Needed! / From 0 to 130 Properties in 3.5 years

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  • Profile photo of PrestonsPrestons
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    @prestons
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    September 21, 2009 - 2:16 pm

     Question:

     
    1. On page 100 of "From 0 to 130 Properties in 3.5 years" could you please show how you calculated the inflation adjustment on capital gains from $295,000 to $144,550 using the average inflation rate of 4.28% over 17 years!
     
    Thanking you in advance

    Profile photo of StumpCamStumpCam
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    @stumpcam
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    September 22, 2009 - 2:12 am

    Hi Prestons, I'll answer this for Steve as it's just maths. The Future Worth Factor is just 1.0428 to the power 17, ie (1+r)^n where r is the inflation rate divided by 100 and n is the number of years. This comes to 2.039 (you need an {x to the power y} button on your calculator).
    Present Worth Factor = 1/(Future Worth Factor) so 295k in 17 years has a Present Worth of 295k/2.039 = 144.679k

    Profile photo of PrestonsPrestons
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    @prestons
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    September 23, 2009 - 12:09 am

    Dear All

    I would like some feedback on the following

    For different purchasing strategies i.e.Buy & Hold, Wraps, Flips etc. what loan structure following would best suit?

    1. Interest only or 
    2. Interest + Principle

    Many thanks

    Profile photo of StumpCamStumpCam
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    @stumpcam
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    September 25, 2009 - 1:20 am

    Looks like your question has been ignored P. (like my answer;)
     I suggest you go for a good trawl through the forums. You'll find a lot of threads discussing IO vs P&I.
    BTW it's principal, not principle. It's a very common misspelling in these forums though. Have a look in dictionary.com.

    Profile photo of StumpCamStumpCam
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    @stumpcam
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    September 25, 2009 - 5:58 am

    Hi Prestons, there's no need for personal emails; just reply on the forum is fine.:)
    I don't know about wraps (and I'm just not interested) but for buy & hold, IO is best if you have any non-deductible debt. There's such little difference between IO & P&I for a short time frame then it doesn't really matter if you're doing flips I would think. Eg for a 350k loan P&I over 30 years, your principal reduces by only about 5k after 12 months.
         IO keeps your borrowing capacity to the max with buy & hold, and you can achieve exactly the same effect as P&I if you put extra payments into an offset account. The main difference is that it requires discipline to not raid the offset account for financial disasters like fast cars!
      Never use your own money unless you have to for investment (tax deductible) purchases; save it for private expenditure (like your ppor that you're going to stay in for at least 20 years). If you don't have discipline, then P&I on investment debt is better than squandering the extra payments on junk. You get the drift I'm sure.

    Cheers, S/C

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    September 25, 2009 - 7:29 am

    I answered this when you placed it on another part of the forum.

    Richard Taylor | Australia's leading private lender

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