Four-bedroom cottage near the ocean

Amagansett Dune Cottage

Amagansett, East Hampton·$2,000,000·4 bed, 3 bath·2,200 sq ft

Balanced: income and growth

7.8% a year over 10 years (4.8% after tax), with $3,263 a month to carry from year one.

Confidence: Moderate

Net yield3.6%

Year-one rent after 1 month vacant, less taxes, charges, insurance, management and upkeep, divided by the price.

Cash on cash-6.5%

Year-one cash after the mortgage, divided by the $606,600 you put in (deposit plus $106,600 of buying costs).

IRR, 10 years7.8%

The annual return that equates your cash in with every year's cash flow and the sale proceeds after 6.5% selling costs. Values grow 4.8% a year.

IRR after tax4.8%

Rental profit taxed at 45% after interest and depreciation; the gain at sale at 33%, including recapture. General illustration, not tax advice.

Total return137%

Every dollar of cash flow plus the net sale, less what you put in, as a share of what you put in.

Break-even rent$17,805/mo

The monthly rent at which year one covers the mortgage ($9,334/mo at 6.35%) and every running cost.

True monthly cost of owning$13,454Interest, taxes, charges, upkeep and what your deposit would earn elsewhere

Renting the equivalent$10,500From comparable leases nearby

Renting saves$2,954/mo

Our caseDownside

Year by year

Year	Rent	Net operating income	Mortgage	Cash flow	Value	Loan
1	$112,500	$72,850	$112,002	−$39,152	$2,096,000	$1,482,751
2	$115,875	$75,036	$112,002	−$36,967	$2,196,608	$1,464,375
3	$119,351	$77,287	$112,002	−$34,716	$2,302,045	$1,444,797
4	$122,932	$79,605	$112,002	−$32,397	$2,412,543	$1,423,939
5	$126,620	$81,993	$112,002	−$30,009	$2,528,345	$1,401,717
6	$130,418	$84,453	$112,002	−$27,549	$2,649,706	$1,378,043
7	$134,331	$86,987	$112,002	−$25,016	$2,776,892	$1,352,820
8	$138,361	$89,596	$112,002	−$22,406	$2,910,183	$1,325,949
9	$142,512	$92,284	$112,002	−$19,718	$3,049,871	$1,297,321
10	$146,787	$95,053	$112,002	−$16,950	$3,196,265	$1,266,821