Congratulations, you have finally found one source of information that is both invaluable and easily applicable for your future investment decisions.
We have read many books, reports and various articles on investments, property investment in particular. The majority of them contain great information, some of them even give you instructions on how to implement that information. However, ericroylawfirm none of them seem to provide the missing ingredient to convert the intent of the article into the actual result. Their “how to” information is never complete, too complicated or overly simplified.
Finally, out of all our research, we have found a major deficiency in the information provided by other authors –
They do not explain properly why you would invest in the first place!
They do not explain how to measure your investments! fasthomebuyersnow
What is the point of investment if you do not have a very specific goal in mind? And if you do have an outcome in mind, how do you know that a particular investment will achieve your desired goal?
We hear many times that people wanting to purchase an investment property, without necessarily knowing why they are buying an investment property in the first place. We have probed for the answer only to receive blank looks, vague statements and complete incomprehension of the questions. catamaranseychelles
Ask yourself, why would you purchase an investment property?
Is it to create more wealth sometime in the future?
Is it to help you financially on a daily basis?
Is it to generate a specific return on your investment?
Is it because investment property is a better investment than shares?
Do you have answers to the above questions? If you do, granddegree how specific are those answers?
We have found that people will generally answer yes to all the above without having any specific outcome in mind.
In this report we will give you the primary tool that you will need to start answering the above questions.
That tool is the ability to measure the return on your invested funds.
If you cannot measure your return, you will never be able to achieve any of your objectives, or you will achieve them through luck and not objective, Speakthestore measured approach. Luck will not let you repeat your investment strategies. Luck is only good in casinos!
So how do you measure returns?
Let’s step back and discuss what is a return on your investment. When people talk about percentage returns or dollar returns on investment, hogame2021 they usually define these returns by time and the baseline investment.
So for example if you purchased a property for $200,000, after 1 year that property might be worth $210,000. Therefore your return on investment is $10,000 in one year or 5% in one year. This example has a specific period of time within which a return is measured.
However, when you measure a return on investment, do you need to measure the return on the whole price of the investment? When you purchase an investment property, do you purchase the property with CASH? Granted, some people in very exceptional and sometimes suspicious circumstances do buy property with cash! You would agree with us when we say that this is extremely rare. In most cases the investment property is purchased with a combination of your money and the bank’s money.
In fact, in most cases, the bank lends the majority of the purchase price – 70% to 90% of the purchase price. This means that generally you only put up your own cash as a fraction of the property price. Given that you have only invested 10% to 20% of the total purchase price, when working out the return on YOUR investment, why would you work out the return on investment based on the whole price of the property? You did not buy the property entirely with cash, therefore you don’t need to work out the return on investment on the entire price of the property.
We can provide an example of this in another field. Say you wanted to purchase an antique chest of drawers. You know that antiques go up in price with time, especially if they are properly looked after.
This particular chest of drawers cost $1,000. You did not have $1,000 so you borrowed $800 from a friend and put up the balance of $200. You made a deal with a friend that at the end of the year once you sell the piece, you will pay him $40 for the loan. At the end of the year you managed to sell the piece for $1,100, or for an extra $100. So you might think that you have made 10% return.
Or $100 profit divided by the $1,000 purchase price. You would be wrong. What you really made was $100 profit less $40 that you have to give to your friend for the loan. That makes $60 profit to you. To calculate your return you need to divide YOUR $60 profit by YOUR $200 investment. This means you made 30%. You only calculate the return on YOUR money and not your friend’s and not on the total purchase price of the antique piece.
Here is an example of how your property investment will look. The numbers are purposely simplified and do not take into account various expenses:
Example 1 – Return on investment based on $200,000 property purchased with an injection of 20% of your own money.
Purchase Price $200,000
Increase in price in 1 year $10,000
Return on Investment in 1 year 5% (this is calculated by dividing the Increase by the Purchase Price)
Example 2 – Return on investment based on $200,000 property purchased with an injection of 20% of your own money.
Purchase Price $200,000
Your investment of 20% $40,000
Increase in price in 1 year $10,000
Return on YOUR Investment in 1 year 25% (this is calculated by dividing the Increase in price by Your Investment)
In both cases the property cost the same and increased in price the same and over the same period of time. However, 79king in Example 2 the return on investment was calculated on YOUR initial cash that you invested into the property. The difference is massive – 500%.
You see, in this example, the bank that lent you 80% of the value of the property is already receiving a return on their investment. It is called interest. They do not require you to give them a part of the property appreciation as well. Given this, you can not count the entire value of the property in your investment return calculations.
Of course it is not as simple as that. There are other considerations that need to be included in the calculations to be precise but the basic idea is correct. If you started applying this method to calculating your return on investment, you will discover that investment property is an extremely high yielding investment returning anything from 20% to 100% per year on your investment. Investment property rivals shares for returns and surpasses shares through removing volatility and risk from your investment.
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