09 August 2004
Let's say you're thinking about buying an apartment as an investment, to rent. You make a down payment, take out a mortgage, and purchase the property. You rent the property for three years, at the same time making mortgage payments. At the end of three years, you sell the property (it has increased in value each year, as real estate often does), and pay off your mortgage.
What is the Internal Rate of Return (IRR) of this investment? In other words, what rate of interest would the bank need to give you to make a savings account an equally attractive investment?
These kinds of questions (and more) can be answered with the neat MacOS utility, FinFlow. (And a reasonable understanding of the economic principles of Time Value of Money.) In a nutshell, FinFlow is a utility that allows you to model cash flows.