Tools of the Trade Tip 10

The tenth Tools of the Trade Tip is on how to calculate future values.  No I'm not a mind reader.  Future value answers the question of what will a future value be on a property or investment.

First, it is a good idea to do these on a financial calculator.  I purchased the HP 10B II.  However, Pat Zaby has a software financial calculator that can be downloaded for free from his www.PatZaby.com website.  I took a CRS course from him and learned quite a bit but I had already downloaded his calculator before taking the course.

Let's say you are planning on investing in a $100,000 rental property that you anticipate will gain 7% per year and that your goal will be to sell it in six years, and you want to know what it will be worth at that time.

After turning your financial calulator on and hitting the orange "C All" which means Clear All registers you would enter 6 and then hit the "N" key to enter the Time (duration).  You would then enter a 7 and then hit the "I/YR" to enter the interest rate or in this case growth percentage per year.  The present value is $100,000 so 100000 gets entered next which due to math rules for most calculators must have the sign changed by hitting the "+-" key and then entering it with the "PV" key for Present Value.  Then the only thing left to do is hit the "FV" key to determine Future Value in 6 years at 7% increase in value per year.  The answer you should get is $150,073.04.

Say you wanted to save up for a down payment by investing $3000 once each year (just $250 per month).  The interest on the CD account is 4.4%.  How much down payment will you have in 5 years?  Entering 5 in the "N", 4.4 in the "I/Yr", and 3000 in the "PMT" register (remember to change the sign), you get $16,379.37 that is saved up for the down payment.

To have the best tools available to you in buying or selling a home, give me a call and put my toolbox to work for you.

Thanks and "Don't keep me a secret--I'm never too busy for your referrals!"
Rob (FREE 2-10 Home Warranty with every home you buy or sell through me!!)
Rob Lang, CRS, ABR, ePro, GRI Realtor®
Places for Rent or Lease http://www.kslease.com/
Rob's Blog at www.ActiveRain.com/blogs/langrob
Realty Executives, Hedges Real Estate (three convenient locations)
(Serving Lawrence, Eudora, Baldwin, Topeka, Tonganoxie, Leavenworth, Kansas City, McLouth, Wellsville, Ottawa, Berryton, Tecumseh, more)
300 Rockfence Place, Lawrence, KS  66049
1037 Vermont, Lawrence, KS  66044
3300 Clinton Parkway Ct., Lawrence, KS  66044
785-393-2274 (cell)   206-339-3199 (fax)
langrob@sunflower.com
http://www.letrobdoit.com/ for property searches
http://douglascountyopenhouses.com/
http://ihaveaddresses.com/