Highest Return on your BPI

November 3, 2017 | Categorised in:

Highest Return on your BPI
(Beach Property Investment)

 

 

Leverage with Low (est) Interest Rate
Produces the Highest Return!

 
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An attractive amenity of investing in Beach Property

Is the capacity to leverage at least 80% of the acquisition

This has positive aspects:

  1. Appreciation of the investment occurs over the total purchase price, not just the capital invested.
  2. A Low Interest Rate on the leveraged amount means greater annual and overall cash flow and appreciation.

Compare the impact on Cash Flow and ROI based on the Same Leveraged amount and varying Interest Rates:

An Investment of $500,000.00 with 80% Loan $400,000.00

Payment Term:   30 years, a standard ‘factor’  on monthly schedule.

Rate  (based on actual rates as of 10.24.2017)

$400,000 at  3%   $4.22 per $1,000, $1,688 x 12  =  $20,256  annual

3.75%   $4.64 per $1,000, $1,856 x 12  =  $22,272  annual

4.25%   $4.92 per $1,000, $1,968 x 12  =  $23,616  annual

On a $400,000 loan,

the annual difference between a loan at 3.00% and a loan at 4.25%

is  $2,300.00

and over 10 years is $23,600.

The annual difference of  $2,360 can be the difference between ‘breaking even’ on annual expense and a having short fall to pay out of pocket.

SO – INVESTMENT in BEACH PROPERTY
when INTEREST RATES are LOW achieves the highest RETURN!