Concerning my findings, the investment in real estate should not be made. First, professors, Gin assumption’s that the appreciation of the real estate has the probability of ranging between 2% is right. Moreover, it will be more economical and fair for the appreciation rate to be at around 2% for any given period. On the other hand, the Galuppo rates of 2.7% rate may seem unrealistic, lading to the investor incurring heavy losses at any given time. It will, therefore, not be a comprehensive move to make this investment if one is interested in fetching high profitability.
Moreover, the holding period of being 31 years is not reasonable. The amount of time ought to be reduced by half. It is therefore not tenable to get into this kind of investment. On his part, professor Gin beliefs that the maximum possible time that this piece of an asset can behold is about ten years, which is quite reasonable. On test, holding 15 years reduced the interest tares by half. According to the LOU GALUPPO report, the property will appreciate at an annual rate of 5% contrary to professor Gin Alan’s assertion of 3%. It will technically be impossible for the property to earn a yearly appreciation rate of 5% for ten years. It is a total lie and, therefore, not appropriate to be part of this investment since the projection is unrealistic.
The payment of rent that is calculated at 8% of the purchase price with an increment of 5% annually is a trick that might lure one into making huge losses. In comparison with my findings and those of professor Gin, the optimal; appreciation will range between 3% for any kind of a period. According to LOU GALUPPO, the lease that is negotiated is three times more than the net rent. This is an implication that the purported owner will incur for the taxes, the insurance cover, and the property maintenance. The payment of all these will amount to an increment of 4% annually, which might have devastating economic impacts. In my opinion, there is no need to offer a net lease that is triple in a scenario whereby all the maintenance, insurance covers, and taxes are cared for by the tenant. The contract may not work as advised investing in the real estate will not be tenable. There are also concerns about scenarios whereby the landlord is in charge of the taxes on the property, insurance of hazards and fire, and cost of maintenance, which may not be in line with the provisions of LOU GALUPPO, which are slightly higher. The $ 2,800 water bill every month is scum, and resultantly, there is an estimated increase of 13% per annum with the careful consideration of problems that are associated with the water infrastructure. However, as suggested by the professor, the projection of the water bill is likely to shoot up to a 40% rate per year. This, therefore, will be a total disgrace. This is because challenges with access to water are likely to be extreme and acute. The interest rate that is set at 6.75% likely does dep to below 5% even with the fact that the property is a commercial investment. It also a very risky move since the investor has to guarantee the loan personally that can be borrowed up to 70% of the price of the property. The probable rate of capital gains might rise to 25% as compared to the projection by LOU GALUPPO 35% for 39 years.
On the other hand, the highest the capital rates can rise is just close to 30%, which implies significant losses to the investor. Offsetting taxes with other sources of income will not be a wise move since it compromises the profitability of the intended asset. LOU GALUPPO suggests that the ordinary income tax will be about 35%, which is a big lie. The cumulative rate of the regular income tax will help ruse up to 40% for both the state and the federal government. Professor Alan suggests that the price of income tax will rise to 45% form the initial year. The perspective of professor Gin Allan is, therefore, practicable and applicable. This is a clear implication that the assumptions made by Louise Galuppo are below the required threshold and thus not workable. There is, therefore, a possibility that the projection by LOU GALUPPO is wrong; they could be insensitive or trying to lie to the investor. The assumption that the investor will be earning aa return of about 11% is not realistic in this scenario and, therefore, not a useful tool for prediction, especially in situations where the markets are incurring a lot of turbulences. Investing in real estate should be the last option for any business person who has an interest in making profits. It is, therefore, wise to quite the business deal and ventures into other activities.