FINC 3501 · WEEK 10

The Price Is Not the Profit

Read the evidence. Test the numbers. Make the decision.

OCTOBER 19 TO 25 · CHAPTER 11

Chapter 11 | The $13,000 Mudhole

One thing: A property can rise in price without becoming a good investment.
18-MINUTE INTERACTIVE PREPDISCUSSION 9ASSIGNMENT 4

Work through the decisions, test the numbers, then build your private prep note. This deck does not submit either graded activity.

START HERE

Two graded destinations, one skill

Discussion 9 | 30 points

Analyze a hypothetical rental property. Calculate cash flow, apply Chapter 11’s five tests, defend a decision, and reply twice.

Assignment 4 | 50 points

Investigate the public sales record for the property assigned in CourseDen privately. Reconstruct transfers, calculate price change, and explain what the record cannot prove.

Both due Sunday, October 25, at 11:59 PM.

Start your discussion post by Thursday evening so others can reply.

READING LENS

What Chapter 11 is actually teaching

The $13,000 Mudhole concerns a risky land opportunity. Do not mistake it for the rental property in Discussion 9 or the separate property investigation assigned in CourseDen.

Claims

What does the seller say will happen?

Evidence

What have you independently checked?

Exit

What happens if the optimistic story fails?

Chapter 11’s five tests are the decision framework, not a guarantee of profit.
CHAPTER 11

The five tests

  1. Positive cash flow from day one
  2. Thorough inspection
  3. Market research completed
  4. Numbers work even with vacancies
  5. A planned exit strategy

Think like an investor

Which test is supported by evidence? Which is only a promise? Which remains unknown?

Do not confuse “unknown” with “false.” Unknown means more investigation is needed.

DISCUSSION 9 · HYPOTHETICAL

A practice rental property for $156,000

Income

$1,650

Expected rent per month

Mortgage

$980

Monthly payment

Taxes + insurance

$260

Monthly estimate

Also: $210 monthly maintenance and vacancy allowance. The seller promises significant appreciation. Inspection, title, rental demand, and exit plan are unverified.
TRY THE MATH

Two legitimate cash-flow views

Calculate both monthly figures. Enter numbers in dollars, then check.

Why two figures? The chapter’s worked example subtracts mortgage, taxes, and insurance. A fuller estimate also recognizes maintenance and vacancies. The $210 difference matters.
DECISION CHECK

Does $200 monthly make it a good investment?

Correct: $200 per month is a projection, not proof. We also lack the investor’s cash down payment, so cash-on-cash return cannot be calculated.
APPLY THE FIVE TESTS

What is still unverified?

An appreciation claim is not market research. A projected surplus is not the same as a stress-tested budget. Ask for inspection findings, comparable rents, vacancy assumptions, and an exit plan.
VACANCY STRESS TEST

What if rent stops for one month?

The mortgage, taxes, and insurance may still come due even when the property is vacant.

At $200 projected monthly surplus, one vacant month still requires $1,240 in mortgage, taxes, and insurance, more than six months of projected surplus. The $210 allowance is an estimate, not cash in hand.
DISCUSSION 9 · DECIDE

Buy, reject, or investigate?

No single choice is required. Choose a position and identify the evidence that could change your mind.

Discussion 9: initial post 250 to 350 words; two substantive replies of at least 75 words each. Each reply is worth 6 of the 30 points.
ASSIGNMENT 4 · SEPARATE CASE

A real property record, a separate assignment

This private CourseDen assignment uses a real property, separate from the Chapter 11 story and the hypothetical rental in Discussion 9.

Open the private Assignment 4 instructions in CourseDen to find the property and official record link.
Do not examine or copy Owner, Homestead Exemption, or Photos information. In the Sales section, record parties by role, not private names. Do not share findings publicly.

Use the private CourseDen Assignment 4 instructions as the governing requirements.

ASSIGNMENT 4 · PRACTICE

Translate names into roles

When you see a party in the public Sales table, what should go into your submitted table?

The role-based table shows the transaction chain without transcribing strangers’ names. Never speculate about anyone’s personal circumstances from a recorded transfer.
ASSIGNMENT 4 · NAVIGATION

Use the correct transaction dates

Purchase

Use the purchase date given in Assignment 4

Locate the priced transaction involving Dr. Gaines.

Sale

Use the sale date given in Assignment 4

Locate the priced sale involving Dr. Gaines.

An intervening zero-dollar transfer is recorded at $0. It is not the purchase price to use for annualized growth.

Keep the actual purchase and sale prices in your private Assignment 4 submission.

ASSIGNMENT 4 · MATH LAB

Price change is not investment profit

Dollar price change = Sale price − Purchase price

Years held = Time between purchase and sale

Annualized price growth = (Sale / Purchase) ^ (1 / Years) − 1

Practice with invented figures, not the property’s real numbers:

Bought for $40,000; sold for $70,000; held 8 years.

A strong annualized price increase can coexist with renovation costs, interest, taxes, insurance, and selling expenses. It is not a net-return calculation.
ASSIGNMENT 4 · VALUATION

Read the right row and column

In the assessor’s Valuation table, use the 2026 column and the row labeled Current Value. That is the full county value for this exercise.

Calculated assessed-value basis = Full Current Value × 0.40

Do not take 40% twice. The county value is not a guaranteed selling price.

ASSIGNMENT 4 · REASONING

What can a sales record not tell you?

Think of costs and cash flows that could change the actual result:

Acquire

Purchase closing costs, financing

Hold

Renovations, maintenance, insurance, property taxes, interest, vacancy, rent

Sell

Commissions, concessions, selling costs

Later sale prices cannot prove what a particular owner earned or what caused a transfer. Describe the record, not someone else’s private circumstances.
BUILD YOUR PREP NOTE

Your work stays on this device

Use this as a study aid. It does not submit your discussion or assignment, and it does not contain private property prices.

WEEK 10 · READY

Read. Verify. Decide.

Discussion 9

Cash flow before and after allowance; apply three of five tests; choose and defend a decision; reply to two classmates.

Assignment 4

Use the county report; record roles instead of private names; use the specified dates; calculate price change and 40% valuation; explain missing costs.

Sunday, October 25 · 11:59 PM

Both activities due. If the assessor website fails, email Dr. B before the deadline instead of guessing.

ONE THING: The price is not the profit.