Return vs. "putting my money in the bank" IRR or CAGR?

Question

What I'm trying to determine is the return on my money for having put it into a building, held the building, then sold it. The question I'm trying to answer is, "How did I do vs. having put my financial advisor handle it?" I'm having a tough time getting my arms wrapped around it. Here's some thoughts...

1. It's easy enough to see that I put, for example, $30,000 in downpayment and closing costs then 10 years later walked out of closing with $100,000. BUT along the way, I "used" some of the income to live off. Maybe I even contributed some of my own funds once or twice because I ran short for a big capex job.

2. I do want to "deduct" 8% per year for "management fee" because I want to know what I made on my MONEY compared to putting it with my advisor, not what I made with my labor and effort.

3. I absolutely consider mortgage paydown part of my return, which is easy enough, as that will be "included" in the pile of money I walk away with at closing.

So I think I need something that will allow me to input an initial investment, then "deposits and withdrawals" along the way, right? I have been looking for an IRR excel calculator but they all seem too complex and I'm not confident with them.

Does anyone have a calculator or know of a calculation I can use to get my figures? I hope I've made myself clear. Feel free to ask questions if not. Thank you!

Scott Jensen · Answer

Oh, and Vanguard 60/40 fund has done 11.07% over the past ten years.

https://investor.vanguard.com/mutual-funds/profile/performance/vbinx

Scott Jensen · Answer

Here is the calculation without considering the 8% management fee.  Do you want me to include the management fee?  I would need to know more specifics, ie 8% of what?

Does that answer your question?

Is the starting date correct or did you mean March 2019?

Mason Fiascone · Answer

the calculator is a bit more for analyzing deals, but I think it could be helpful / repurposed for what you've written about in your latest comment.

Mason Fiascone · Answer

Yea of course - here's a link: http://www.themichaelblank.com/syndicated-deal-analyzer/ It's pretty great, and I know a bunch of syndicators that use it as well. Agreed - gotta stop the tail chasing! I can underwrite a 50 unit building in roughly 15 minutes on this thing. If it looks promising, I spend another 15-20 minutes vetting more.

Kenneth LaVoie · Answer

@Mason Fiascone - I'd love to see the name of the calculator. I don't mind spending a little money to get a good one. I've certainly used up enough time "tail chasing' to justify just buying what I need! Thank you.

Kenneth LaVoie · Answer

What confuses me a LITTLE is that I have SEVERAL buildings and use the cash flow to live on. So I'm making "withdrawals" as well as "deposits" (adding my own funds for capex from savings, for example). But I THINK that takes care of itself...the PL each year reflects the money that's left over, period. I included any capex that came out of the buildings OWN cash flow in my profit and loss for each year.

The only capex I included was 11,005 from 2012 because that came from "outside" the building. So my deal looks like this. Starts in 2009 ends in 2019, total 8.5 years. It was a horrible deal, one of my first. The purchase price, interest rate, etc. are all irrelevant, this much I know. All that matters is:

1.) My initial "deposit",

2.) any withdrawals or additions I made along the way, and

3.) What I walked away with at closing.

The only other "premise" is that all the cash flow is considered a "withdrawal". With this deal, I did NOT deduct an imaginary 8% management fee but I'll run that once I am clear how to figure this.

Remember, I'm trying to compare this to the alternative: Leaving my $ in a balanced portfolio of stocks and/or bonds.  i.e. What annual return must I have gotten in an account to have plunked down 29,649 in 2009, endured a negative return of 14K along the way, put in another 11K  in 2012, then cashed out in 2019 for 85,898. If someone can create a calculator to handle this and similar transactions, I'll include it in my tools package with credit, of course, that I sell with my book. (PM me for link if you want to check it out, I don't think BP wants me listing my own product, haha!)

Mason Fiascone · Answer

I personally use a syndicator analyzer since I operate in multifamily, and after inputting the details you mentioned above - down payment, purchase price, debt/mortgage on the property, all expenses such as management fees, it would definitely tell you what your returns - cash on cash, ARR, IRR would be!

Maybe a little extra complex to make a syndication tool work for SFH, but I use Michael Blank's syndicated deal analyzer and love it. Super easy to use and has paid for itself for me.

PM me if you want to see screenshots or anything like that.

Scott Jensen · Answer

I could do that calculation. What is the hypothetical rent? What is your hypothetical net monthly income? If 30k is your down payment, what is the loan amount? Want it amortized over 30 years?