after-tax equity yield

after-tax equity yield

Methods of financial analysis for an equity position in real estate, being the net return rate on an investment after deducting expenses,interest,and taxes.

Example: An investor buys a property with $100,000 down (equity) and $400,000 in financ- ing. The investor receives $7,000 in cash flow each year, after paying income taxes on money earned from the investment. After 5 years, the investor sells the property and receives $150,000 after deducting mortgage balance, taxes, and sale costs. The investor received a return of the orig- inal $100,000 and a sale profit of $50,000 upon sale, plus the $35,000 received over the course of 5 years, for a total of $85,000.

After quantifying the various components, one then calculates yield by using any of several formulas,such as cash-on-cash and internal rate of return.