Yesterday, we trumpeted the killer sale Eastdil Secured’s Benjamin Lambert pulled off on his Upper East Side townhouse. He bought the place for somewhere in the mid-six figures in 1978, and just sold it for $10.5 million. Reader Richard S. Zimmerman, a partner at accounting firm Berdon LLP, points out that our math is a little off. Or a lot:
Your interest calculation on the Lambert sale is off by a large factor. Assuming Lambert had 100% financing in 1978 and purchased the house for $300K and he sold in 2011 at $10.4 M (minus the broker at 5% = $9.88M) his rate of return would be a more modest 10.5% per year not 2,000%.
Having foolishly believed the pen mightier than the calculator, we asked Mr. Zimmerman for further explanation, and he provided another handy—and telling!—example. Read More