Real estate CV & calculate your return on real estate CV yourself

What return do you expect from a real estate CV? Many private individuals invest in real estate, often also in a real estate CV, because of the promised return. But there are risks and what happens if the interest rate changes slightly. Therefore, always make multiple sensitivity analyzes and analyze a real estate CV thoroughly. You can also use this methodology for a ship CV or fleet fund. The tax benefits can be even greater. Investing in real estate can be very lucrative with a real estate CV, so make that calculation.

How much return does the real estate CV really provide?

  • What is a Limited Partnership CV
  • Real estate CV, shipping CV, film CV
  • Return on real estate
  • Calculation of return on real estate CV, a calculation example
  • Some real estate CV scenarios
  • Profit distribution or real estate bond
  • Buy a real estate CV lock

What is a Limited Partnership CV

CV stands for Limited Partnership. The CV is a special variant of the Partnership under Firm, VOF, with the main difference being that two types of partners are distinguished in the CV:

  • The managing partners;
  • The limited partners.

The managing partner of the CV, like the partner of the VOF, is personally and severally liable for the company’s debts. This does not apply to the limited partner. The limited partner can lose a maximum of his entire investment. He receives no interest on the money he invests, but shares in the profits as a partner. The method of profit distribution and other important parts of the agreement between the partners in the CV are regulated in the partnership contract.

Real estate CV, shipping CV, film CV

The CV is also a common legal form in real estate, shipping and film. The real estate CV involves a large number of private investors. In the past, this was mainly the more wealthy private investor with knowledge of real estate, but nowadays we increasingly see the smaller private investor who is lured by the expected high returns. The substantiation of the CV is then more or less taken for granted.

Return on real estate

People often look at the return projected on paper, sometimes 10 to 15%. But you should especially look carefully at the underlying variables that determine the return and the administrative costs that you are charged. A high return is often possible because a real estate CV is based on financing with borrowed money and high leverage. A very high return is also made possible, but this is often accompanied by a greater acceptable risk.

Calculation of return on real estate CV, a calculation example

Suppose the assumed picture is as follows:

  • Investment project: 1 million euros
  • Mortgage loan: 750,000 euros
  • Investment CV: 250,000 euros
  • Variable interest mortgage: 5%
  • Project duration: 5 years
  • Expected project return: 7%
  • Real estate value after 5 years: 1.1 million euros

The quick calculator sees that the annual return of this CV is 13%, namely:

Proceeds = 70,000 euros or the assumed 7% of 1 million euros in investments. Variable interest mortgage = 37,500 euros, or 5% of 750,000 euros. The net amount remains 32,500 euros. That is approximately 13% of 250,000 euros.

Some real estate CV scenarios

That’s a good forecast. But what if one or more variables start to shift, what does that mean? To gain more insight into this, four fictitious scenarios follow as a kind of sensitivity analysis:

  1. Suppose the project return is still 1% higher, so 8%. Then the return on the CV increases by 10,000 euros, or 4%, to no less than 17%. This is 42,500 compared to 250,000 euros,
  2. Suppose the variable mortgage interest rate is 1% higher at 6%, with the same project result. Then the return on the CV drops to 25,000 euros, 70,000-45,000 euros, or to 10% of 250,000 euros, or
  3. suppose the project return is 6%. Then the return is equal to 22,500 euros, 60,000-37,500 euros. This results in a 9% return, and
  4. Suppose the project return is 6% and the mortgage interest is 6%, then 15,000 euros remains, 60,000-45,000 euros, or 6%. In place of the 13%.

Profit distribution or real estate bond

As a participant in a CV, you usually also share in the profits when a project is sold at a profit. We are increasingly seeing real estate bonds on the market. They pay a fixed, attractive interest rate, but any profit goes to the provider of the bonds and not to the bond holder.

Buy a real estate CV lock

The sensitivity analyzes make a lot clear and help you make a responsible decision. A real estate CV or ship CV can offer you a good return, but always keep in mind that the return can also be considerably lower. Let us calculate it for you.