I was just working on a spreadsheet earlier though to calculate one's return with leverage, principal paydown, assuming $0 cash flow, and appreciation at the rate of inflation. Was very interesting, and made me like RE even more as an investment, if that were possible. :)

Well hello. This caught my attention, since I'm likely to pursue precisely this strategy when I jump into the deep end - I have no need for cash flow, and am much more interested in principal paydown. Long-term buy-and-hold except without needing or wanting to live off of rent income until maybe 30-40 years down.

Got that spreadsheet available to share?

Hmm, so I found the spreadsheet, and I have no idea what the fuck is going on in it.

Some documentation from past me would have been nice.

EDIT: Okay, I figured it out, there was just one superfluous column that had a 10% cash flow return that was being paid back down into the mortgage (it was assuming you didn't need the cash flow), but I had changed the spreadsheet halfway through to assume no cash flow, so that column wasn't doing anything or referenced anywhere, just confusing me with its existence.

Someone feel free to check my numbers.

Assumptions:

- Cash flow pays the mortgage payment, taxes, insurance, maintenance, vacancy, management, etc. Overall property is "break even."

- 100k purchase price, 25k down, 75k financed @ 5.5%

- 3% inflation (and house appreciates at the rate of inflation).

In 10 years, house will be worth $134,391.64. Loan balance will be $$61,763.64. Equity is $72,628.00.

That is $54,042.05 equity in real dollars (backing up 10 years at 3%). Putting 25k in for 10 years and getting 54k out gives you a real return of ~8% (11.25% nominal return).

So an 8% return just from using 5.5% leverage and breaking even on the cash flow (and assuming house appreciation = inflation rate), you'll make about 8% return. Of course, that doesn't count transaction costs, but nor does it count tax benefits.

It's probably not worth buying a break even house, but if you're adding some decent cash flow on top of it...