[Calc Review] Help me analyze this deal

[Dave Madoch]

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*This link comes directly from our calculators, based on information input by the member who posted.

I am trying to put together an argument to sell this property and buy a multi-family.  We originally lived in the property for 4 years and it has been a rental for the last 4 years. We purchased in 2010 with 3.5% down(FHA)/$265k sales price and refinanced 4 years later right before we changed to a rental with a 4.25%/ 30 year loan/$250k. It is not cash flowing at all and that is why I would like to get rid of it. We could sell for $425k

Thank you for your help

I am just not sure how to put this through the calculator to get an accurate report. 

[Michinori Kaneko]

Hey Dave, wow that makes a huge difference!  I have a simplified analysis below.  Assume $420k sales and 3% paid for commission.  You made a whopping $142k gain (just from property appreciation).  Based on your initial investment (3% of 265 + 3k closing) that's a whopping 38% annualized return so congrats (in reality its probably slightly different based on how much you saved from not renting vs your mortgage/tax/insurance expenses)!!!  Your property appreciated 5.9% annually on average.  This means you have about $170K of equity in that property (very simplified, not considering 4 years of principal repayment).  IF your property appreciates by 5.6% next year (which you seem to be skeptical about), then you are generating 14.6% return on your equity.   You get slightly less than your equity when you sell (because of commission and closing).  If you can get more than 16% or so on your duplex with your 170k (which i definitely think you can based on where you buy), i think its a good tradeoff!  But remember cash is king but cashflow is not the only income source :) you may find a property that generates more than 16% Cash on Cash return but if the property depreciates over years it's not good.  just my 2 cents... hope that helps!

Sales Price	420
(Less 3% sales commission)	-12.6
Purchase Price	265
Gain from appreciation	142.4
Total Cash invested	10.95
Annualized ROI	37.8%
Annualized Appreciation	5.9%
Equity Available	170
Next Year ROE	14.6%