E-learning Topic ~ Time to Sell?
This training topic shows you how to use planEASE to determine if it is time to sell your investment. First, you will find the investment base (sale proceeds) if the property is sold now. Second, you will find out what the return (IRR) would be if you leave this investment base in the current property using your own assumptions.
Training Topic Notes
This training topic shows you how to use planEASE to determine if it is time to
sell your investment. First, you will find the investment base (sale proceeds) if
the property is sold now. Second, you will find out what the return (IRR) would
be if you leave this investment base in the current property using your own assumptions.
Now that you know the return (IRR) of staying in the current property, you can compare
this return (IRR) to your other investment opportunities. One way to use this training
topic is to check the "Check to Show All Example Text" and print out the webpage.
You can then use these steps as an outline to enter your own numbers from your own
analysis.
1. Finding Investment Base (File 1) - (Sales Proceeds)
+/- Method A
Video 6:30 Minutes
The first thing you must evaluate the amount of money that would be realize from
selling the building currently owned. To do this set up the assumptions to produce the
Property Sale Report to find out what the sales proceeds would
be. The sale proceeds become your investment base (investment base = sale of the
building less transaction costs, repaying the loan balance, and paying Capital Gain
Tax). There are two methods for finding the investment base.
Finding Investment Base Method A
Data Need:
Original Purchase Price
Original Depreciation Schedules
Original Loan Terms
Sale Price (as of Sale Date)
Selling Costs (as of Sale Date)
Click on File/New Assumptions on menu bar.
The
Assumption Set Specification Dialog Box will appear. You always start a NEW
Property Analysis in planEASe this way.
Set Sale Price (Investment Page)
- Original Purchase Date
- Holding Period = Length of time to get to your current Sale Date
- Sales Price Method = Specified $ Price
- Sales Price Parameter = Sale Price (as of Sale Date)
- Selling Cost = Selling Costs (as of Sale Date)
Entering the Investor’s Page
- Capital Gain Rate
- Cost Recovery Recapture Rate - Losses Taken Currently
Set the Loan (Loan Page)
- Loan Amount = Original Loan Balance
- Loan Interest Rate = Original Loan Rate
- Loan Period = Original Loan Period
- Loan Type = Original Loan Type
Add as many loan pages needed to represent the financing on the property.
Set Depreciation (Depreciation Page)
- Depreciable Amount = Original Depreciable Amount
- Depreciable Life = Original Depreciable Life
Add as many Depreciation pages needed to represent the Depreciation on the property (TI's, etc.).
Click on Basic button to bottom right, and wait a second,
then click vertical/page 3
The sell row in the after tax column shows the amount the seller would net from the sale of the property
after paying transaction costs, repaying the loan balance, and paying Capital Gain
Tax.
Click Exit to the Bottom Right, then Click Report/Sale Report.
This sale report (which is part of the Reporting Extension) shows the amount the seller would net
from the sale of the property after paying transaction costs,
repaying the loan balance, and paying Capital Gain Tax.
+/- Method B
Video 5:10 Minutes
Finding Investment Base Method B
Data Need:
Original Basis
Prior Cost Recovery
Loan Balance (as of Sale Date)
Sale Price (as of Sale Date)
Selling Costs (as of Sale Date)
Click on File/New Assumptions on menu bar.
The
Assumption Set Specification Dialog Box will appear. You always start a NEW
Property Analysis in planEASe this way.
Set Sale Price (Investment Page)
- Date = (one year less than your Sale Date)
- Holding Period = 1 Year
- Sales Price Method = Specified $ Price
- Sales Price Parameter = Sale Price (as of Sale Date)
- Selling Cost = Selling Costs (as of Sale Date)
Entering the Investor’s Page
- Capital Gain Rate
- Cost Recovery Recapture Rate - Losses Taken Currently
Set the Loan (Loan Page)
- Loan Amount = Loan Balance (as of Sale Date)
- Loan Interest Rate = 0%
- Loan Period = 20 Years (not Important)
- Loan Type = Interest Only
Set Substitute Basis
(Click the Depreciation Page then Select Edit/Add Substitute
Basis Page)
- Substitute Basis = Original Basis - (Minus) Prior Cost Recovery
- Prior Cost Recovery = Prior Cost Recovery
Click on Basic button to bottom right, and wait a second,
then click vertical/page 3
The sell row in the after tax column shows the amount the seller would net from the sale of the property
after paying transaction costs, repaying the loan balance, and paying Capital Gain
Tax.
Click Exit to the Bottom Right, then Click Report/Sale Report.
This sale report (which is part of the Reporting Extension) shows the amount the seller would net
from the sale of the property after paying transaction costs,
repaying the loan balance, and paying Capital Gain Tax.
+/-2. Return of Holding the Current Property (File 2)
Video 6:55 Minutes
Return of Holding the Current Property (File 2)
Click on File/New Assumptions on menu bar.
The
Assumption Set Specification Dialog Box will appear. You always start a NEW
Property Analysis in planEASe this way.
Set Sale Price (Investment Page)
- Price of Property = Current Loan Balance + Investment Base
- Date of Acquisition = Current Month
- Holding Period = Your Choice (5 Years?)
- Sales Price Method = Your Choice (Cap Next Years NOI?)
- Sales Price Parameter = Your Choice (10% Cap Rate?)
- Selling Cost = Selling Costs (as of Sale Date)
Entering the Investor's Page
- Capital Gain Rate
- Cost Recovery Recapture Rate - Losses Taken Currently
Set the Loan (Loan Page)
- Loan Amount = Original Loan Balance
- Loan Interest Rate = Original Loan Rate
- Loan Period = Original Loan Period
- Loan Type = Original Loan Type
or
- Loan Amount = Loan Balance (as of Current Month)
- Loan Interest Rate = Exsiting
- Loan Period = Amount of Amortization Left in Years (17.5 ?)
- Loan Type = Original Loan Type
Add as many loan pages needed to represent the financing on the property.
Set Depreciation (Depreciation Page)
- Depreciable Amount = Original Depreciable Amount
- Depreciable Life = Original Depreciable Life
Add as many Depreciation pages needed to represent the Depreciation on the property (TI's, etc.).
Set Substitute Basis
(Click the Depreciation Page then Select Edit/Add Substitute
Basis Page)
- Substitute Basis = Original Basis - (Minus) Prior Cost Recovery
- Prior Cost Recovery = Prior Cost Recovery
Revenue and Expenses
- Add the revenue and expenses need to forcast the future of this property.
These reports will help you evaluate the return of leaving the investment base in the current property