Sorry folks, was traveling for a couple weeks, and now hunkering down for the holidays. Light posting until 2008, but I'm definitely here, and definitely keeping up with the comments. I have some great properties I'm going to be highlighting soon, so don't forget about me.
Friday, December 21, 2007
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2 comments:
Missionite - I've enjoyed reading some of yours posts on SocketSite. I took a look at your Own vs. Rent spreadsheet today for the first time and I did have one question about a formula you use. Basically, it has to do with the compounding effect of price appreciation. That is, if you assume something appreciates for 5 years at 2.5% per year at the end of 5 years will it have appreciated by 12.5% (5*2.5%) or 13.14% ((1.025)^5-1)? I would argue it would be the latter and over a longer time period or higher rates of appreciation this could lead to significant differences. Would you agree, or am I incorrect on your assumptions (by the way I am an extremely amateur real estate watcher so if I'm making a completely nieve comment here please feel free to correct me)? Thanks.
You must be talking about the little calculator I have on the side to compute a sale price employing a rate of change (I employ compound interest formulas elsewhere on the spreadsheet, as you probably noticed). I think it just came down to my personal preference: I like to think of the sale price in terms of percentage of the original sale price, as opposed to using compound percentage. Makes it easier to think about. But enough people have given me grief about it, that I have taken your advice and changed it to a compounded formula.
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