ROE (Return on Equity) & Leverage
The views of
the LDM input page below illustrate average annual ROE measures with and without seller financing. In scenario#1 the
seller has agreed
to finance $500,000 (lines 40 & 41) at an interest rate of 5
percent for a term of three years (lines 43 & 44), while the
seller
does not provide owner financing in scenario #2 (line 40). ROE
Note that the average return on equity under scenario #1 is 63.54 percent and 23.10 percent under scenario #2. In the case of the second scenario the developer has to come up with the $500,000 in cash, significantly effecting the average return on equity.
Note that the average return on equity under scenario #1 is 63.54 percent and 23.10 percent under scenario #2. In the case of the second scenario the developer has to come up with the $500,000 in cash, significantly effecting the average return on equity.
Seller
Financing - Scenario #1
| Seller Financing | ||||||||
| 40 | Seller Financing, Yes or No? | Yes | < Yes or No | |||||
| 41 | If Yes, Amt of Seller Financing | $500,000 | < Enter Amount | |
||||
| 42 | If Yes, Amt Must Be Less Than: | $745,075 | ||||||
| 43 | If Yes, Interest Rate | 5.00% | < Enter % Rate | |||||
| 44 | If Yes, Term in Months | 36 | < Enter Term of Loan | |||||
| 45 | If Yes, Line 44 Must Be Less Than Line 45 | 46 | < OK | Avg Annual Return on Equity | 63.54% | |||
| Owner Tax | ||||||||
| 46A | %
Ownership |
35% | < Enter % Owned | |||||
| 46B | Filing Status | Jointly | < Enter Status | |||||
Seller
Financing - Scenario #2
| Seller Financing | ||||||||
| 40 | Seller Financing, Yes or No? | No | < Yes or No | |||||
| 41 | If Yes, Amt of Seller Financing | < Make No Entry | ||||||
| 42 | If Yes, Amt Must Be Less Than: | NA | ||||||
| 43 | If Yes, Interest Rate | < Make No Entry | ||||||
| 44 | If Yes, Term in Months | < Make No Entry | ||||||
| 45 | If Yes, Line 44 Must Be Less Than Line 45 | Avg Annual Return on Equity | 23.10% | |||||
| Owner Tax | ||||||||
| 46A | % Ownership | 35% | < Enter % Owned | |||||
| 46B | Filing Status | Jointly | < Enter Status | |||||
Land Development Model, LLC
302 West Lafayette Road
Medina, OH 44256
330.441.1690
302 West Lafayette Road
Medina, OH 44256
330.441.1690