Thank you for your finance question today.
The ACV is something that will constantly change over time. A true ACV will take into consideration your equity in the property less any depreciation.
Just looking at your equity alone changes every single month.
Imagine you solely own a $1MM building, with a $500K loan. Each month two things change: 1) You make principal payments to lower your loan balance, thereby increasing equity in the investment. 2) The value of the real estate changes with the market.
It is easy to calculate the principal paydowns, but unless there is an actual sale, we can only estimate the value of the real estate on an occasional basis.
We know only one "for sure" about the property value: It WILL change. Up or Down we don't know.
You also have some other "what ifs" in your scenario: "The mod matures in 5 years at which time my uncle can buy me out". But for HOW MUCH can he buy you out? You didn't make this clear, so most importantly, we have no values to plug into any ACV formula.
There are just not enough variables in your question to be able to answer an ACV or Present Value calculation.
What numbers do you need? Thank you
In order to compare two options at least, you would need to make some assumptions about how much you would sell out for in 5 years, what the property is worth in 5 years from now, plus the value of the property in some other number of years in the future, such as 10 or 20 years if you still participate in the deal.
Also, we would need to know the basis of the building for depreciation purposes, and the terms of the financing (20 years @ 5% for $300K loan, etc)
Hmmmm, Property in 5 years should be worth 1.2mil. 10 I would imagine 1.8mil 20 is to far to tell. Terms of finance are 600K 5 year balloon amortized on 20 years.
Value of Property today is 1 mil. Current note is 600K
Will be bringing 30K 6 months ago and another 30k end of month and credit. Locked into for a min of 5 years with loan mod
We keep missing each other :(
You say you have 30K paid in. What does the other owner have paid in as of today (or 6 months ago)
WHat percentage ownership did you get with your 30K 6 months ago?
What is the interest rate on the note?
WHat will Uncle pay you in 5 years for your share?
Sorry for all the questions....otherwise not enough info still.
Yes paid 30K 6 months ago and no interest has been established.
As it stands the ownership will be 50 / 50 on mod sign
Unsure what the percent will be paid at 5 years but can be drafted into a contract
I know lots of variables sorry
You have a loan mod. What is the interest rate estimated at on the new loan?
What percentage of the deal do you own NOW?
Nothing until mod is signed
Otherwise I don't have a way to determine what that 30K is worth today
and another 30K
so 30K bought you nothing but a pat on the back?
Pretty much I know family huh
If so, the ACV is currently 1 Pat on Back
And a smooch from Auntie
LOLOL yeah that is what I was afraid you would say
So how can we move forward?
The only number I can calculate is when you have a definite 50% interest
then define that please
as this will aid in the contract we sign
So assuming you did the transaction today, you have 60K invested worth 50% of 400K = 200K or an instant 333% ROI
Looking 5 years down the road....one moment while I calculate
Ok that makes sense for today. 5 years? I know you are calculating :)
In 60 months, 600K paid at 6% rate pays down the principal by 90K +/-
The estimated future value = 1200K. Equity = 1200K - 510K = 690K equity * 50% = 345K equity in 5 years
your 200K value today grows to 345K in 5 years
Is this commercial or residential property?
Commercial, Got it so now the just need to plug in the management, insurance, and rental income and such to determine the real value. Waiting on those figures.
Depreciation assumes 80% building value 20% land = 800K depreciated over 39.5 years = 20,250 per year
Deprec over 5 years = 101,250 means that 345K - 50K = 295K ACV in 5 years
In 20 years, assumed 0 loan; 50% depreciated = 1800K - 400K dep = 1400K * 50% = Your ACV = 700K
There you go!