Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Standard view
Full view
of .
0 of .
Results for:
P. 1
Sinking Fund Factor

Sinking Fund Factor

Ratings:

4.5

(4)
|Views: 12,681 |Likes:
Learn the formula for sinking fund and discover how you can use it to plan for a future rental property capital expenditure.
Learn the formula for sinking fund and discover how you can use it to plan for a future rental property capital expenditure.

Availability:

See more
See less

01/25/2013

pdf

text

original

PROAPOD®
Real Estate Investment Softwarewww.proapod.com
Sinking Fund Factor
James R Kobzeff
The sinking fund factor provides the annuity payment that must be made each conversion period ata given rate of compound interest to have available a specified sum at some given future time period.This calculation for a sinking fund is used to make real estate investment decisions such as howmuch money must be placed on reserve to have a specified sum at a given future time period totake care of scheduled capital expenditures or other expenses.In other words, when a real estate investor wants to start setting aside money so he or she hasenough available at some future date to replace, let's say, for a roof on an apartment complex he or she owns, the investor would create a sinking fund.
The formula:
P = 1 / SnWhere:P = Cash flow payments of equal size at equal intervalsSn = Future value of a series of annuity cash flowsExample: A real estate investor needs \$10,000 in 5 years to replace refrigerators in an apartmentcomplex that he or she owns. If the investor starts an ordinary annuity fund (payments made at theend of each year) that yields 15% per year, the investor would use the sinking fund factor tocalculate what each annual payment would have to be to accumulate the \$10,000.
PMT (15,5,,10000,0) = \$1,483.16
Use of HP-10B/12C Calculators:
N = 5%i = 15FV = 10,000PMT = -1,483.16 Note: The HP-I0B/12C calculator must be set for payments to be made at the beginning of eachconversion period to make this calculation.
Use of ProAPOD Mortgage Calculator:
Amount = \$10,000