The Math

The Math

The main goal to the program is to get you into your future home and purchase it when you’re ready but before you proceed forward you should review the market. Orlando home prices continue to increase and 2016 is predicted to climb higher (Orlando Business Journal); for instance, the Orlando-Kissimmee-Sanford home prices increased 6.5% in August 2015. (CoreLogic) and ORRA says “Orlando median price rises 10 percent” in November (ORRA). Of course we can’t predict the future but I’m sure you can research online or the above statistics to see what others are saying.

Purchase Right Price Increases

Let’s say the equity groups purchase price is $190,000 dollars. Each year, your Purchase Right Price increases by 5% (ie, Prior Year Purchase Right Price x 1.05). Therefore, the example below shows the Purchase Right Price for Years 1-5:

YEAR 1	$199,500
Year 2	$209,475
Year 3	$219,949
Year 4	$230,947
Year 5	$242,495

*Rounded to the nearest dollar

As you can see, a 5% increase is much better than a 6.5%+ increase. There will be additional costs that the resident will incur if they choose to exercise the Purchase Right such as closing costs to purchase the home, including transfer taxes, title insurance, attorneys’ fees insurance, etc. Therefore, the resident actual total costs to exercise the Purchase Right will vary.

Yearly Rent Increases

In the event you’re not ready to fully purchase the property and choose to continue renting then your monthly rental rate will increase by no more than 3.75% yearly. This rental rate is below the Orlando’s average increase. Per the Marcus & Millichap Report for Orlando, the 2015 average rent increased 5.9% to $1,036 per month, the highest year-end level on record (Statistics Report). In addition, CNN Money & RentRange reported in October 2015 that Orlando-Kissimmee-Sanford area had their rent increased 10%; putting Orlando in the top 25% largest rental increases in the United States.(CNN Money).


Example: If the monthly rent for year 1 is $1,500 per month then the increase for the next year is $75/month (ie, $1,500 x 1.0375).

YEAR 1	$1,500
Year 2	$1,560
Year 3	$1,610
Year 4	$1,680
Year 5	$1,740

* Rounded to the nearest ten dollars.

Total Cost Basis

Total Cost Basis is the price the equity group pays for the home, closing costs, initial repairs, and renovations. This is used to determine your Purchase Right Price.

Example:

PURCHASE PRICE	$180,000
Closing Costs*	$2,000
Renovations	$15,000
Initial Repairs	$3,000
Total Cost Basis	$200,000

*Includes costs such as transfer taxes, attorneys’ fees, title insurance, etc.