Calculating how much money will you require in the future for your property?
Category: Funding & Financing
Tags: financial planning, property funding, real estate investment
In a real estate investment, there are some financial considerations one should put in place. To begin, many investors usually want to approximate their property’s possibility to produce rental income. In most cases, this is usually done by evaluating the rental history of a property similar to the one in question.
Other than that, it is also important to approximate the worth of assets. For instance, if a property breaks on rental income, you can still sell it a better price in the future depending on how its worth on the market might change over time. Therefore, it is crucial for one to calculate the future value of his or her property. What is listed below is an illustration on how to calculate the future value of your property.
To calculate this, one will need to find out the project growth rate of the asset in question. According to statics, real estate has tremendously grown at a rate between 4 to 5% which is dependent on the price index one looks at. In U.S, the house price index has gone up by 3.4% since 1991. Using this, this price index is then converted to decimal hence becomes 0.034.
To calculate the expected future value based on growth rate, 1 is added to the rate and raised to a power equivalent to the number of years one is looking at. Then the following mathematical formula is used:
Future growth = (1 + annual rate) years
After that, multiply the future growth by the recent value of the property in question.
Future value = (future growth) x (recent value)
Example
For instance, let’s assume you purchase an investment worth $100,000 and you would like to approximate it value in the next 10 years. This can be calculated as shown below.
Assume we use an average rate of 3.4%.
Future growth = (1 + 0.034)10 = 1.4
In order to get the future value, the below formula will be useful
Future value = (future growth) x (recent value)
Future value = 1.4 x $100,000 = $196,000.
SEARCHES RELATED TO FINANCIAL PLANNING
I WANT START A BUSINESS IN...
IS THERE HELP IN MY INDUSTRY?
- Expansion Capital
- Funding For Equipment
- Business Acquisition Funding
- Consulting Services
- Hiring & Training Staff
- Management Support Services
- Manufacturing
- Mining
- Professional and IT Services
- Transportation and Warehousing
- Accommodation and Food Services
- Agriculture
- Construction
- Culture and Recreation
- Finance and Real Estate
- Forestry, Hunting and Fishing
- Health and Social Assistance