Highest Return on your BPINovember 3, 2017 | Categorised in: Blog
Highest Return on your BPI
(Beach Property Investment)
Leverage with Low (est) Interest Rate
Produces the Highest Return!
An attractive amenity of investing in Beach Property
Is the capacity to leverage at least 80% of the acquisition
This has positive aspects:
- Appreciation of the investment occurs over the total purchase price, not just the capital invested.
- 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%
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!