Hello

Can your service make a table complete with accompanying rationale as
to how this following *investment* will be shared from an ownership
perspective?

Three people are going to share in a condominium *investment*. The
cost of the condo is $288,000. One person is going to pay $72,000
(25%) cash as a down payment and nothing more. The second will pay a
fixed $ 700/ month and nothing more. The third person is going to pay
a 15 year amortized Canadian mortgage of $1100 per month + condo fees
(approx. $ 200/ month) + upfront costs of $7800 and will be
responsible for all upkeep and repairs.

It is assumed that the ownership position will change over the first 15 years.

Could you please provide a breakdown by yearly increments: 1 yr, 2 yr,
3 yr, 4yr, 5yr, 10 yr and 15 yr of each person's ownership position?

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Request for Question Clarification by websearcher-ga on 09 May 2005 05:47 PDT

Hello luvmycrows:

Thanks for the interesting question. 

I would love to try to build your table for you. Before I can give you
a *final* answer, though, I am going to need your help in setting some
values and making some decisions that were not clear from your
original question.

1. That "responsible for all upkeep and repairs" part is a little
vague, mathematically speaking. I know that it is hard to tell exactly
how much upkeep and repairs are going to cost, but for our purposes,
we need to make an estimate. You know this property better than I do -
what do you think would be a fair monthly/yearly cost for repairs and
upkeep? Perhaps that value might increase incrementally as time goes
by as well. What do you think?

2. Something we need to decide in these calculations is whether we are
going to take into account the fact that a dollar today is worth more
than a dollar in 10 years - because of the fact the that investment
made in the condo today could have been invested somewhere else for 10
years earning income. If you want to take this factor into account, we
need to pick a yearly "value of investment".

Once we have decided on those two issue, I can compile a final table
for you. In the meantime, how does the following table format work for
you? I will assume that yearly upkeep and repairs come to $2000 and
that we are NOT taking "value of investment" into account.

Person A pays $72,000 (25%) cash as a down payment and nothing more
Person B pays a fixed $ 700/ month and nothing more
Person C pays a 15 year amortized Canadian mortgage of $1100 per month
+ condo fees ($ 200/ month) + upfront costs of $7800 + $2000/year in
upkeep and repairs

                     A        B        C                   A     B     C
INVESTMENT $                                 Investment %
Year 1            72,000    8,400   25,400                68%    8%   24%
Year 2            72,000   16,800   43,000                55%   12%   33%   

Does that work for your purposes?

Thanks - looking forward to completing this question for you. 

websearcher

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Clarification of Question by luvmycrows-ga on 09 May 2005 09:29 PDT

Hello

re: #1- "responsible for all upkeep and repairs". Let us assume $200/
month and a 3% increase in value per year.

re: #2- Let us assume a 5% annual increase in value of dollars used in
the down payment ($72,000) if it were invested elsewhere.

The table looks good.

Thank you

Hello luvmycrows:

Thanks for the clarification. To compute the resulting table, I have
used the following values:

* That upkeep and repairs cost $2400/year, or $200/month on average. 
* That a fair "value of investment" for money invested is 5%/year.
That is, that any moneys put into the condominium could have been
earning 5% interest a year invested somewhere else (RRSP, T-Bills,
Bonds, etc.) Now, you say in your clarification that we should use the
5% on the downpayment - but to be completely fair, that percent should
be applied to *all* moneys coming in once they come in.
* That we should figure out the compounding value of investments on a
monthly basis, since most of the ongoing costs are strictly monthly or
are being estimated on a monthly basis.
* We'll start our model as of the beginning of 2005. It could be
started anywhere, so let's pick that date.

So this means that:

* Person A pays $72,000 (25%) cash as a down payment and nothing more = $72,000
* Person B pays a fixed $ 700/ month and nothing more = $700/month
* Person C pays a 15 year amortized Canadian mortgage of $1100 per month
+ condo fees ($ 200/ month) + upfront costs of $7800 + $200*/month (+
yearly increases) in
upkeep and repairs = $7,800 + $1,500+/month

To calculate the ownership positions at the ends of years 1, 2, 3, 4,
5, 10, and 15, I found the following online Financial calculator:

Amount Saved Calculator
URL: http://www.tcalc.com/tvwww.dll?Save

While this is meant to be used for an investment like RRSPs, the same
formulas can be used to compute current ownership values in this
condo. So, for the three people involve, I entered the following
values into this calculator:

Person A
********
Savings start date: 12-31-2004
Balance on start date: $72,000
Deposit amount: $0
Deposit frequency: Monthly (though it is n/a in this case)
Number of years: 15
Rate of return: 5.00
Would you like to print an amortization schedule? Yes

Person B
********
Savings start date: 12-31-2004
Balance on start date: $0
Deposit amount: $700
Deposit frequency: Monthly 
Number of years: 15
Rate of return: 5.00
Would you like to print an amortization schedule? Yes

Person C is a little trickier, with having to increase the cost of
upkeep and repairs each year. What I did here was to use the
calculator 15 times, transferring the end amount to the next
calculation and upping the monthly cost accordingly.

Person C (year 1)
********
Savings start date: 12-31-2004
Balance on start date: $7,800
Deposit amount: $1,500
Deposit frequency: Monthly 
Number of years: 1
Rate of return: 5.00
Would you like to print an amortization schedule? Yes

Once I had the three amortization schedules calculated, I built the
following table using the end values for each of the years we are
interested in. From there, for each of these years, I added the three
values up and then divided out to find the ownership positions (in
percentages).


        Person A             Person B            Person C        Total Inv.
EOY          
 1   $75,683.67 (68.2%)   $8,595.21 ( 7.8%)  $26,617.34 (24.0%) $110,896.22 
 2   $79,555.78 (55.4%)  $17,630.14 (12.2%)  $46,471.08 (32.4%) $143,657.00
 3   $83,626.00 (46.9%)  $27,127.34 (15.2%)  $67,416.46 (37.9%) $178,169.80
 4   $87,904.47 (41.0%)  $37,110.43 (17.3%)  $89,511.68 (41.7%) $214,526.58
 5   $94,736.07 (37.1%)  $47,604.26 (18.7%) $112,817.75 (44.2%) $255,158.08
10  $118,584.69 (24.9%) $108,697.60 (22.8%) $249,886.43 (52.3%) $477,168.72 
15  $152,186.66 (19.8%) $187,102.28 (24.4%) $428,468.34 (55.8%) $767,757.28
 
 Now, please bear in mind that these figures do *not* mean that the
condo will be worth $767,757.28 after 15 years - these figures are
only used to calculate the ownership positions, they have no other
meaning.
 
 FYI, the monthly costs that were used for upkeep and repair, assuming
$200/month in year 1 and a yearly compounded increase of 3%, were:
 
  Year 1 = $200.00
  Year 2 = $206.00
  Year 3 = $212.18
  Year 4 = $218.55
  Year 5 = $225.10
  Year 6 = $231.85
  Year 7 = $238.81
  Year 8 = $245.97
  Year 9 = $253.35
 Year 10 = $260.95
 Year 11 = $268.78
 Year 12 = $276.84
 Year 13 = $285.15
 Year 14 = $293.70
 Year 15 = $302.51
 
 Search Strategy (on Google):
 * "future value" calculator
 
I hope this helps!

websearcher

Thank you for the quick service