Buy And Hold Calculator
Decompose a long hold into its four sources of return — cash flow, principal paydown, appreciation and depreciation — and find out which one is actually carrying the deal.
Buy And Hold Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Pre-tax at exit — capital gains and recapture are not deducted.
- Appreciation and NOI growth are assumptions and dominate the result.
- Excludes capital expenditure beyond what is inside the operating expense ratio.
In short: Most buy-and-hold returns are an appreciation bet in disguise. Over ten years cash flow contributes 38.6044%, paydown 13.3582% and appreciation 48.0374% — the least controllable source is the largest.
Formula
total = Σ cash flow + (value − selling cost − balance)
annualised = (total ÷ invested)1/n − 1
[('cash flow', 'the only spendable source'), ('paydown', 'forced saving funded by tenants'), ('appreciation', 'an assumption, not a projection'), ('depreciation', 'deferral and rate arbitrage, mostly recaptured')]
Worked Example
- Compute year-one cash flow after debt service.
- Amortise the loan to find principal repaid over the hold.
- Grow the value at your appreciation assumption.
- Value the depreciation shelter at your marginal rate.
- Attribute the total across the sources and see which dominates.
1,050,000 at 25% down borrows 787,500 at 6.5%, costing 59,730.43 a year against 84,240 of NOI — 24,509.57 of year-one cash flow, 8.6454% on 283,500 invested. Over ten years cash flow totals 346,468.60, the balance falls to 667,612.00 for 119,888.00 of paydown, and the value reaches 1,481,128.70 for 431,128.70 of appreciation. That mix is 38.6044% cash flow, 13.3582% paydown, 48.0374% appreciation. Net sale proceeds of 707,688.58 bring the total to 1,054,157.17 — a 3.7184× multiple and 14.0342% annualised, from a property that appreciated at only 3.5%.
Strengths & Limits Of This Model
Where this engine is strong
- Attributes return across all four sources
- Grows NOI year by year rather than holding it flat
- Names appreciation as an assumption, not a projection
Where it stops
- Pre-tax at exit
- No explicit capex schedule
Practical Use Cases
Underwriting a long hold
Seeing the full return, not just the cash flow.
Stress-testing appreciation
Re-running at zero growth to test the real case.
Comparing against equities
Putting a levered property on an annualised basis.
Explaining leverage
Showing how 3.5% growth becomes a double-digit return.
Planning an exit
Sizing net proceeds after costs and balance.
Methodology & Editorial Standards
The four sources are computed independently and then attributed as shares of their total, because the mix is the point of the page rather than the headline return. Cash flow compounds the entered NOI growth year by year rather than assuming a flat figure. Depreciation is valued at the marginal rate and explicitly described as deferral rather than income, since most of it is recaptured. The annualised return is computed on total capital including closing costs, not on the deposit alone.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Buy And Hold Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
What are the four returns of buy-and-hold real estate?
Cash flow, principal paydown, appreciation and the depreciation tax shelter. Only cash flow is spendable before you sell; paydown is forced saving funded by tenants; appreciation is an assumption; and depreciation is largely recaptured at exit.
Which source contributes most?
Over a long hold in a normal market, appreciation usually dominates — which is uncomfortable, because it is the source you control least. A deal that only works with appreciation is a market bet wearing an income statement.
How does leverage amplify returns?
Appreciation accrues on the whole property while your capital is only the deposit, so a modest growth rate produces a much larger return on equity. The same mechanism works in reverse: a small decline in value can wipe out a large share of your equity.
Should I count depreciation as a return?
Carefully. It defers tax rather than creating cash, and most of it is recaptured at up to twenty-five per cent when you sell. The genuine benefit is the rate arbitrage between your marginal rate and the recapture rate, plus the time value of the deferral.
What appreciation rate should I assume?
Something close to long-run inflation unless you have a specific reason to expect more. Assuming a market will outperform is exactly the assumption that fails in the holds that go wrong, and the honest test is whether the deal still works at zero.
Is principal paydown really a return?
Yes, though an illiquid one. Your equity increases every month without any contribution from you, funded by rent. It accelerates over time as amortisation shifts from interest toward principal, so it contributes far more in the second decade than the first.
Why is my annualised return higher than the appreciation rate?
Because you own the whole asset with a fraction of the capital, and because three other sources contribute alongside appreciation. A property growing at three and a half per cent can produce a low-teens return on equity once leverage, cash flow and paydown are counted.
What is a realistic hold period?
Long enough for the transaction costs to be absorbed, which usually means at least five years and often ten. Buying and selling costs together can exceed ten per cent of value, and a short hold rarely recovers them.
Does this include tax on the exit?
No. Net proceeds here are before capital gains tax and before depreciation recapture, both of which fall due in the year of sale. A 1031 exchange defers them; holding until death eliminates the gain through a stepped-up basis.
What is the biggest risk in a long hold?
Being forced to sell at the wrong time. Every other risk — vacancy, repairs, a soft market — is survivable if you can hold through it, which is why reserves and sustainable cash flow matter more than the projected return.