I've adopted a method to calculate the TRUE ROI, factoring in NOI and then deducting DS (debt service), which represents your mortgage payment. This approach provides a more accurate reflection of your investment returns. Warming: Many realtors' Pro Forma don't include DS in their calculations, which can lead to misleading projections of your deal's profitability. It's crucial to exercise caution and understand how to run your own numbers. By doing so, you gain the power to control your offer effectively. Remember, profit is made when you purchase, not when you sell.
On top of that, the complete way to calculated your total investment return is by using 4 pillars of investment returns.
1. Cash Flow 2. Passive Appreciation 3. Principal Recapture 4. Active Appreciation.
Here are the 4 Pillars of Real Estate Returns:
1, Cash Flow Cash flow refers to the extra money a property generates after subtracting all expenses. It's a crucial measure of investment success. This includes rent income minus costs like property management and mortgage payments. Positive cash flow means the property covers its own expenses and leaves extra for future investments or emergencies. 2, Passive Appreciation Passive appreciation is when a property's value goes up over time due to external factors like economic growth or
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