Public Example + Simulator

How can the same starting equity evolve across generations?

Start with the default example, then switch to a guided custom model. The page can extend to one hundred years, split the hold between original owner and heirs, compare exchange pacing, and show annual cash yield on the original root equity.

This is a public illustrative engine, not tax advice. It uses illustrative rate bands, cap-rate assumptions, depreciation math, a side fund for reinvested depreciation tax savings when selected, and a year-of-transfer heir reset.

Core assumptions

Illustrative inputs, nominal dollars. Review these before reading the results.

Starting property: $1,000,000
Starting equity: $500,000
Down payment: 50%
Horizon: 1976–2026
Owner / heirs: 30 / 20 years
Base exchange pacing: Every 10 years
Sale costs: 5.0%
Gain tax assumption: 30.0%
Operating tax assumption: 32.0%
Amortizing loan term: 30 years
Depreciation: 80% over 39 years
Side fund: 5.5% annual growth

Calculation assumptions and rate bands

Mortgage, cap, and appreciation rates use illustrative calendar-year bands, not a verified historical series. Appreciation compounds once annually. All appreciation assumptions are positive; falling prices and inflation are not modeled. Tax conventions are applied uniformly rather than reconstructed for each historical year.

NOI equals year-end value times that year’s cap rate. Operating costs are implicit in NOI; no separate capital reserves or vacancy stress is deducted. Loan payments amortize monthly, and annual interest equals payments less principal repaid. New acquisition loans lock the acquisition-year rate.

Operating deductions are assumed fully usable in the same year, without passive-loss limits. All gain uses the single tax rate above; separate recapture, NIIT, state rules, and estate tax are excluded. Property equity deducts selling costs and debt but excludes sale tax, the side fund, and past distributions. Cash-if-sold additionally deducts modeled sale tax.

Annual straight-line depreciation preserves remaining carryover schedules at exchange and adds a new schedule only for added depreciable basis. Land is not depreciated. Tax-month conventions, property-class changes, elections, and cost segregation are not modeled.

Inheritance assumes a qualifying full basis reset on both paths, not a gift or every trust transfer. The transfer takes priority over an exchange scheduled in the same year; terminal-year exchanges are excluded. Inheritance does not restart the mortgage term.

The side fund receives the lesser of the depreciation tax saving and positive cash flow. That allocation reduces cash available for distribution. Prior fund balances grow before the year-end deposit. Fund taxes and fees are excluded; shortfalls require additional cash and are identified separately.

Exchanges reinvest sale equity and borrow to restore the selected down-payment ratio. Larger portfolios require available financing; lender coverage limits and acquisition financing costs are excluded. Reverse-exchange and seller-note cards are separate gross arithmetic illustrations, not tax or transaction workflows.

The public starting acquisition assumes zero closing cash and zero financing fees, so root cash equals the down payment. In a recorded chain, original contributed cash includes recorded purchase closing cash and stays separate from current equity and tax basis.

Rate anchors interpolate linearly between years and stay at the nearest endpoint outside this range.

Illustrative rate anchors
Year	Mortgage	Cap rate	Appreciation
1976	8.8%	8.1%	4.8%
1985	9.2%	8.5%	4.5%
1995	7.4%	7.2%	5.6%
2005	5.9%	6.4%	2.8%
2015	4.3%	5.4%	5.1%
2026	5.5%	5.7%	3.8%
2036	5.8%	5.8%	3.6%
2056	6.0%	5.9%	3.4%

Educational illustration, not tax, legal, or lending advice or a performance forecast. Use actual records and professional review for a real transaction. Cash yield is not total return or IRR.

Starting root equity

Exchange chain

$500,000

Sell, pay tax, reinvest

$500,000 on both paths

Ending gross property value

Exchange chain

$26,101,919

Sell, pay tax, reinvest

$13,964,555

Modeled taxes paid on sale

Exchange chain

Sell, pay tax, reinvest

$1,447,409

Equity after selling costs, before sale tax

Exchange chain

$17,976,498

Sell, pay tax, reinvest

$9,617,446

Final-year cash before side-fund allocation

Exchange chain

$687,956

Sell, pay tax, reinvest

$378,721

Cash after side-fund allocation

Exchange chain

$595,762

Sell, pay tax, reinvest

$318,734

Cash if sold at the end, after modeled tax

Exchange chain

$13,463,509

Sell, pay tax, reinvest

$7,816,765

Annual cash yield on original equity

Exchange chain

137.59%

Sell, pay tax, reinvest

75.74%

Default 50-year structure

Root equity: $500,000.

Original owner: 30 years. Heirs: 20 years.

Exchange pacing: every 10 years. Down payment: 50%.

Read the model

Choose equity, basis, cash yield, tax timing, or the side fund. Each view answers one question.

The transfer marker separates the original owner and heirs. Open annual model data to inspect the values.

Illustrative scenario · all years modeled

One starting investment, two comparable paths

Both paths start with $500,000 of equity and share the same time horizon and market assumptions. Calendar years are model labels, not recorded historical performance.

Sell at inheritance or continue holding

Illustrative family returns include the owner and heirs. Inheritance does not reset the original cash invested.

Heir sells at inheritance · 2006

Total family proceeds · exchange path

$7,612,564

Cash from final property sale: $4,494,526
Final-year cash after tax & debt: $168,98733.80% final-year cash yield on root equity
Profit after contributed cash: $7,112,564
Lifetime ROI on original investment: 1422.51%
Annualized lifetime return (IRR): 12.91%
Total return multiple on original investment: 15.23×

Annual cash is the owner’s final modeled year before the transfer; sale occurs immediately after the conditional basis reset.

Heir continues holding · 2026

Total family proceeds · exchange path

$26,266,450

Cash from final property sale: $13,463,509
Final-year cash after tax & debt: $687,956137.59% final-year cash yield on root equity
Profit after contributed cash: $25,766,450
Lifetime ROI on original investment: 5153.29%
Annualized lifetime return (IRR): 12.20%
Total return multiple on original investment: 52.53×

Includes every modeled year of distributed cash through the final year.

Compare both paths and cash-flow totals

Complete illustrative family cash flow includes the original owner and heirs. Original cash remains the starting investment; inheritance does not reset that denominator.

Total proceeds include cash distributed along the way, the side fund once, and final sale proceeds after modeled selling costs, debt and tax. Profit subtracts initial capital and additional cash required. At the assumed qualifying inheritance, both paths reset basis to their own fair market value; debt and selling costs remain.

ROI is cumulative profit divided by contributed cash; it is not an annual rate. IRR uses modeled year-end cash flows, not actual dated XIRR. Ambiguous IRR or a nonpositive denominator stays not computed. The starting row is an annual run rate and adds no distributed cash. Cash after a sale at inheritance is not reinvested in this comparison.

Illustrative lifetime family returns
Path / decision	Year	Distributed cash	Side fund	Net final sale	Total proceeds	Additional cash	Profit	Lifetime ROI on original investment	ROI on all contributed cash	Annualized lifetime return (IRR)	Total return multiple
Exchange chainSell at inheritance	2006	$2,384,270	$733,768	$4,494,526	$7,612,564	$0	$7,112,564	1422.51%	1422.51%	12.91%	15.23×
Exchange chainContinue through final year	2026	$8,482,234	$4,320,707	$13,463,509	$26,266,450	$0	$25,766,450	5153.29%	5153.29%	12.20%	52.53×
Sell, pay tax, reinvestSell at inheritance	2006	$1,774,476	$741,825	$2,849,709	$5,366,010	$0	$4,866,010	973.20%	973.20%	11.54%	10.73×
Sell, pay tax, reinvestContinue through final year	2026	$5,216,366	$3,566,246	$7,816,765	$16,599,378	$0	$16,099,378	3219.88%	3219.88%	10.93%	33.20×

Original owner · 1976–2006Heirs · 2006–2026

Explore a question

How much modeled equity remains on each path?

Property value less modeled selling costs and debt. Accumulated distributions and the side fund are excluded; this is not total investment return.

Exchange chain
Sell, pay tax, reinvest

Yearly values are shown before year-end exchange or transfer events. Each exchange reinvests all sale equity and adds debt to restore the selected down-payment ratio; this can grow the property portfolio substantially. A fixed scenario cannot establish future returns. Review the assumptions above before comparing outcomes.

Milestones across the modeled horizon

Year 1986

Exchange event

Property value

$1,572,543

Net equity

$1,048,391

Basis

$794,872

Deferred tax

$209,713

After-tax cash flow

$61,318

Year 1996

Exchange event

Property value

$3,473,003

Net equity

$2,361,443

Basis

$1,068,946

Deferred tax

$669,122

After-tax cash flow

$104,588

Year 2006

Assumed heir basis reset

Heir step-up

Property value

$6,876,522

Net equity

$4,494,526

Basis

$6,876,522

Deferred tax

After-tax cash flow

$168,987

Year 2016

Exchange event

Property value

$10,434,668

Net equity

$8,540,783

Basis

$5,465,954

Deferred tax

$1,334,094

After-tax cash flow

$269,904

Year 2026

Terminal year

Terminal position

Property value

$26,101,919

Net equity

$17,976,498

Basis

$9,753,527

Deferred tax

$4,512,989

After-tax cash flow

$687,956

Assumed heir-side result

Assumed transfer year: 2006

Assumed basis at transfer: $6,876,522

Year-end annual NOI: $1,487,809

Year-end after-tax cash flow: $687,956

Annual cash yield on original equity: 137.59%

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Sell vs Exchange vs Hold Until Death

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Deferred Tax Liability Over Time

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After-Tax Return Comparison

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