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after-tax equity yield |
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After-Tax Equity Yield The yield on an investment in real estate after subtracting taxes and other charges. One calculates the after-tax equity yield by taking the proceeds from the sale of real estate, subtracting expenses (such as paying off the remaining mortgage), and adding back in the cash flow that the real estate generated while one owned it. One then subtracts the total taxes owed on the profit from the sale and the cash flow and expresses the result as a percentage of the original investment. 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. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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