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You are considering a speculative real estate purchase of raw land (no rental income) for $3,000,000. Your choices are to pay cash for the
You are considering a speculative real estate purchase of raw land (no rental income) for $3,000,000. Your choices are to pay cash for the property or take a loan for 75% of the property value which bears an interest rate of 6%. If the property value appreciated by 10% after 1 year, what is the investor return (return on equity) in each scenario, calculated in dollars and percentage? Purchase Price Loan Equity Appreciation Interest Exp Investor (equity) return $$ Investor (equity) return % No loan Loan
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