Hi – in some earlier posts ppl have been calculating gross return on investment – surely a net return is more accurate?
For instance
P/price = $100 000
Rent = $140 per week ($7280 pa)Gross return = 7.28%
Assuming interest only 7% = $7k therefore +ve
However:
P/price = $100 000
Rent = $140 (factor 4 wks vacancy = $6720 pa)
Rates = $1200 pa
Management and Repairs etc = $1000 paNet return = $4520 on $100k
Therefore 4.52% (and -ve as well)
Whether your drive is -ve or +ve, do others then add to the net the expected capital appreciation?
Whatever the figures that you put into the above, is a gross return hold any relevance to your purchasing decision? (other than a quick check)
cheers
brahms
If you don’t ask, the answer is no!!
I always calculate yields using net figures. otherwise it is as you say, not showing the true picture.
If you forget about management fees, body corporate fees, council rates, maintenance, land tax, insurance etc etc., the figures will be very skewed.
________________________
Bundy made me do it…..
I agree on net cash figures – the exception is depreciation as it is non-cash.
If you can determine a net taxable return then you can work out internal rates of return for comparison.
Your money has to be working best for you.
Jeff
Hi guys
I add interest, rates, insurance, and management fees up and deduct them from rental income. It ain’t positive unless its a figure in black at the end (and even then, think about repairs, maintenance if needed etc – but I factor an allowance into purchase price for the next few years of repairs, unexpected outgoings)
Cheers
CDCastleDreamer
Hi guys, appreciate your feedback.
cheers
brahms
If you don’t ask, the answer is no!!
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