http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/ Learn, Network, Invest Tue, 24 Nov 2009 04:43:52 -0500 http://wordpress.org/?v=2.8.5 hourly 1 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-74657 Eric Tue, 27 Oct 2009 16:36:38 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-74657 like a previous posted pointed, it's important not to confuse precision (e.g. decimal points in your math) with accuracy (how closely does the 5% assumption match reality). .-= Eric´s last blog ..<a href="http://www.siliconvalleyrealestateinvestor.com/2009/10/25/3-secrets-to-reading-housing-data-for-the-real-estate-investor-part-1-seasonally-adjusted-data/" rel="nofollow">3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data</a> =-. like a previous posted pointed, it’s important not to confuse precision (e.g. decimal points in your math) with accuracy (how closely does the 5% assumption match reality).
Eric´s last blog ..3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56187 Gregory Bain Sun, 20 Apr 2008 00:06:28 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56187 Ted, I have never sold an apartment complex - not many in my area and I have only seen one come on the market. That investor got a real steal. Of course, he had to invest in repairs and had to have the money power to do so. I don't think he will ever be selling that complex at a loss. In fact, he made so much money on the deal he purchased a tract of land and built another high end (for my area) apartment complex. On the other hand, I have seen a lot of other "commerical" property that may take ten years to come back to the purchase price. And, there are many "projects" either on hold or moving at a snails pace in the commerical market today. But, you did start this post with the opening sentence of "apartment building investor" and I have no hands on experience to cast doubt on your time value of money. It is out of my league. Good Luck. Ted,
I have never sold an apartment complex – not many in my area and I have only seen one come on the market. That investor got a real steal. Of course, he had to invest in repairs and had to have the money power to do so. I don’t think he will ever be selling that complex at a loss. In fact, he made so much money on the deal he purchased a tract of land and built another high end (for my area) apartment complex.
On the other hand, I have seen a lot of other “commerical” property that may take ten years to come back to the purchase price. And, there are many “projects” either on hold or moving at a snails pace in the commerical market today.
But, you did start this post with the opening sentence of “apartment building investor” and I have no hands on experience to cast doubt on your time value of money. It is out of my league. Good Luck.

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56181 Ted Karsch Sat, 19 Apr 2008 18:22:14 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56181 Greg, you are right. Thanks for pointing that out. Commercial properties can drop in value just like residential property, however, in my opinion, commercial properties like apartment buildings are better suited as investment vehicles then single family homes. The main reason for this is the fact that apartment buildings generate a steady stream of income. Also, the value of an apartment building is partially determined by the amount of income that it brings in. This helps to keep valuations more closely aligned with reality. For example, a lot of people who bought vacation homes in past 5 years were told by their realtor that the vacation home was a great investment, even at an inflated price. Unfortunately, many of these vacation/investment homes are now facing foreclosure because the owners weren't able to collect enough rent to pay the annual mortgage payments. Greg, you are right. Thanks for pointing that out. Commercial properties can drop in value just like residential property, however, in my opinion, commercial properties like apartment buildings are better suited as investment vehicles then single family homes. The main reason for this is the fact that apartment buildings generate a steady stream of income. Also, the value of an apartment building is partially determined by the amount of income that it brings in. This helps to keep valuations more closely aligned with reality. For example, a lot of people who bought vacation homes in past 5 years were told by their realtor that the vacation home was a great investment, even at an inflated price. Unfortunately, many of these vacation/investment homes are now facing foreclosure because the owners weren’t able to collect enough rent to pay the annual mortgage payments.

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56176 Gregory Bain Sat, 19 Apr 2008 17:01:42 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56176 Math doesn't matter. It is all speculation on what the value will be in the future. How come no one said the answer should be $669,000 or 1 million less the decline value of today's market? It is a nice post and a nice formula, Ted. But the value or preceived value does not continue to climb every year. In my opinion - of course. Math doesn’t matter. It is all speculation on what the value will be in the future. How come no one said the answer should be $669,000 or 1 million less the decline value of today’s market?
It is a nice post and a nice formula, Ted. But the value or preceived value does not continue to climb every year. In my opinion – of course.

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56167 Alice Spencer Sat, 19 Apr 2008 06:49:05 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56167 I always check and double and triple check one small mistake could break you especialy with the tight margins today. I always check and double and triple check one small mistake could break you especialy with the tight margins today.

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56165 steve jenings Sat, 19 Apr 2008 06:06:25 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56165 Made many a mistake with moving those 2 decimals over can be costly. Made many a mistake with moving those 2 decimals over can be costly.

]]> http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/comment-page-1/#comment-56154 423Chandler Fri, 18 Apr 2008 21:25:31 +0000 http://www.biggerpockets.com/renewsblog/2008/04/17/apartment-building-investment-and-the-time-value-of-money/#comment-56154 $1,331,000 is correct. I bet your calculator is cutting off the last two decimals of the Future Value Factor of 1.331. That's causing it to look like $1.3 million to you. $1,331,000 is correct. I bet your calculator is cutting off the last two decimals of the Future Value Factor of 1.331. That’s causing it to look like $1.3 million to you.

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