Fictional example · Noninteractive
Already own a rental? Explore hold, sell or refinance.
What changes when annual operating costs rise $3,000? These two fixed examples use the existing Pro decision model. They do not use your calculator inputs above or represent a saved-run comparison.
Assumptions for both complete examples
- Current value $240,000; initially debt-free, with $0 existing debt and debt payments.
- Annual scheduled rent $24,000; vacancy allowance $1,200. NOI (net operating income) = rent − vacancy − operating costs.
- Five years; 0% annual appreciation and NOI growth; 6% annual discount rate; 6% selling costs.
- Pretax: the model uses a 0% tax rate to exclude taxes, not to assume a tax-free sale. Future repairs and capital expenditure are excluded.
- Illustrative refinance: 50% loan-to-value, 6% fixed interest, 30-year amortization, closing costs of 2% of the new loan.
Hold and refinance include operating cash received at each year-end and a sale after year five. NPV (net present value) is the present value of those modeled cash receipts, including any immediate cash-out. It is not annual profit.
Original expenses
Annual operating costs: $8,400.
Annual NOI: $24,000 − $1,200 − $8,400 = $14,400.
- Hold five years — NPV
- $229,239.48
- Sell now — proceeds / NPV
- $225,600.00
- Refinance + hold five years — NPV
- $227,029.17
With no debt, annual NOI before the excluded costs is $14,400. After the illustrative refinance, annual NOI less principal and interest is $5,766.47, before those excluded costs.
Expenses increase $3,000/year
Annual operating costs: $11,400.
Annual NOI: $24,000 − $1,200 − $11,400 = $11,400.
- Hold five years — NPV
- $216,602.39
- Sell now — proceeds / NPV
- $225,600.00
- Refinance + hold five years — NPV
- $214,392.08
With no debt, annual NOI before the excluded costs is $11,400. After the illustrative refinance, annual NOI less principal and interest is $2,766.47, before those excluded costs.
The expense increase lowers both hold and refinance NPV by $12,637.09; sell-now proceeds stay unchanged. Different value, growth, selling-cost or discount assumptions can change this comparison. This does not identify the best decision for you.
Refinancing adds a $120,000 loan, $2,400 closing costs and about $8,633.53 annual principal and interest. The $117,600 immediate cash-out is borrowed money, not profit; its use or reinvestment is not modeled. The loan balance after five years is $111,665.23, leaving $113,934.77 from the sale after selling costs and loan payoff, before excluded taxes. That exit amount excludes earlier cash receipts.
These are complete fictional inputs only within the stated exclusions, not a property forecast, lender offer, tax estimate or personalized recommendation. Actual loan terms, taxes and future repairs can materially change the outcome.