One indicator dominates investment decision. - cash buffer period
First principle indicators. -
At minimum , i need to maintain 36 months cash buffer for any property that our company will own.
Example -Real estate - residential
Cash down payment. - 3 lacs
Cost of infrastructure - 17 lacs
Time period of payment. - 20 years
Rent on property. - 11,000 - with 10 % increment every year
Rate of interest - 8%
EMI - 14500
Rent equal emi - 4 years (approx) - the property will be free after 4 years
Total emi payment to the bank in 4 years = 14500 *48 = 696000
total rent payment for first 4 years - 13000 ( average rent payment 4 years) - Rs 13000 * 48 - 624000
Amount to be paid by owner for first 4 years - Emi - rent amount = 696000- 624000 = 72000
First principle indicators. -
- Cash buffer months - number of months that one has before you will not be able to meet you cash payments
- Rent equal emi - How many years it willl take for the rent to equate emi
At minimum , i need to maintain 36 months cash buffer for any property that our company will own.
Example -Real estate - residential
Cash down payment. - 3 lacs
Cost of infrastructure - 17 lacs
Time period of payment. - 20 years
Rent on property. - 11,000 - with 10 % increment every year
Rate of interest - 8%
EMI - 14500
Rent equal emi - 4 years (approx) - the property will be free after 4 years
Total emi payment to the bank in 4 years = 14500 *48 = 696000
total rent payment for first 4 years - 13000 ( average rent payment 4 years) - Rs 13000 * 48 - 624000
Amount to be paid by owner for first 4 years - Emi - rent amount = 696000- 624000 = 72000
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