How To Calculate Active Appreciation

So how do we calculate Active Appreciation?

Check out the transcription of this video below:

So we’re gonna take a good close look at our 4 Ways to Win here as well. So I’m going to get my highlighter ready.

Okay, so starting on the upper right hand here. So this is the flip component of running your math on your 4 Ways to Win. Up here in the right hand corner, we’re gonna plug in that down payment of $91,000. We’re gonna put in $60,000 for the renovation, and then we’ve got our building inspection, land transfer tax, and legal fees.

So the total cash required to close on this property is $158,575. Now, we’ve also gone ahead and plugged in for vacancy rate. I do this a little differently than Jordon does, but in my vacancy rate over here, I’ve plugged in 25% for vacancy. Now, if we think of a calendar year and we’ve got three months during the renovation period, I plug in 25% for the vacancy is how I account for that. And I believe Jordan actually plugged it into his renovation and caring costs. As he mentioned, as long as you account for it, you’re good, but just make sure that you know where that is actually calculated.

I’ve gone ahead and included all of our expenses here as well.

And then the initial financing on the property over here, so at our purchase price of the $455,000 and then here’s our mortgage amount as well.

Now we need to solve for the Active Appreciation on this property. So what it looks like here is $77,925 now, if you guys were thinking that the Active Appreciation was $85,000, that’s actually incorrect.

So the calculation to solve for Active Appreciation and everybody who did their pre-work and the Flip to Yourself Course, they would know this, is that you’re gonna take your ARV, your After Repair Value of $600,000, and then you’re going to subtract the $455,000 of your purchase price, and then you’re going to subtract your renovation cost of $60,000, and then also subtract your closing costs of $7,075, which means the Active Appreciation is $77,925, and you’ll see that I plugged that into my screen here.

On the bottom right hand side, Active Appreciation, we tucked that number right in there.

Year one has that huge boost in value to the property.

Now, again, to recap, the vacancy rate is 25% because I’m renovating the property for a three month period, so we need to account for that.