Hello all,
This is my first post and thank you for any help you can give. I have created a NPV formula for renting out houses. One of my variables in this spreadsheet is home price appreciation. I am currently being conservative and using 1.5% (over the next 30 years). Could anyone shed some light on what they currently use, what has been used in the past, or what you would expect the next 30 years to be? Thank you in advance.
I am also having trouble on finding a rent increase % as well.
I use 2.5% for appreciation in the application (Mortgage Coach) that I use.
Thank you Christopher.
Your welcome. Do you mind sharing the equation?
Sure,
It is just the NPV function (=NPV(A:1…) in excel, and I am taking Rent - Loan payments - Taxes, and adjust yearly by appreciation and rent increase.
I am using the current US bond rate as my discount rate, since that is the only guaruntee i know of.
Here’s one suggestion: since it’s a rental property, why not use the same % appreciation as your rent increase assumption? If you were analyzing an apartment building, which would fall under commercial property, you would calculate the final resale value (terminal value) by “capitalizing the NOI of the property” - I usually treat single fam rental properties the same way - assume value will correlate to income. This is much more reliable than forecasting long-term appreciation rates, at least IMHO. If you need me to explain further, I’ll be happy to.