Good Investment II?

Result after 30 years in AP investment:

Loan: $ 243,000
Repayment period: 360 months
Interest: 7.5% per annum
Repayment per month: $ 1,699.09
Total payments: $ 611,674.32
Finance charge $ 368,674.32
Principal payment: $ 243,000.00

Finance charge per year: $ 12,289.14
Principal payment per year: $ 8,100.00
Total payment per year: $ 20,389.14

Income per year: $ 9,600 ($800 per month)
1st 7 years total income: $ 67,200
Income per year: $ 10,800 ($900 per month)
Subsequent 7 years: $ 75,600
Income per year: $ 12,000 ($ 1,000 per month)
Another 7 years: $ 84,000
Income per year: $ 13,200 ($ 1,100 per month)
Another 7 years: $ 92,400
Income per year: $ 14,400 ($ 1,200 per month)
Last 2 years: $ 28,800
Total income: $ 348,000
Total Finance charge: ($ 368,674.32)
Loss: ($ 20,674.32)

Equity payment: ($ 270,000)

Sources of income over 30 years in AP investment:
1) Rental: ($ 20,674.32)
2) Capital appreciation: $1,550,742.62 - $ 270,000.00 = $ 1,280,742.62

Net profit: $ 1,260,068.30 – ($ 20,674.32) = $ 1,239,394

How do you derive $1,550,742.62? With principal of $ 270,000 at the beginning of the investment period of 30 years, with 6% per annum return rate, you would get the amount. Why use 6% per annum return rate? The rate is used after considering the real example of the investment over 16 years period which experienced booming and busting period.

In next posting, we will discuss is AP investment match the criteria of “Investment is most successful when it’s most business-like and vice versa.”