We had talked about how good the property investment could benefit our ROI. We will need some way to measure any particular real estate investment opportunity coming out at any point of time.
If your rental yield annually could cover all of the property expenses including the loan payment, it is a good investment. If it not only cover all the expenses, but also generate some passive side income for us, we see it as a attractive investment.
Bank is like our business partner because they are the big share holder in our property investment. To measure the yield of the real estate investment, the first thing we need to do is to calculate the annual installment that we need to pay the bank.
The common used formula for this which we always call it "Amortization" is the following:
R = P ( i / ( 1 - ( 1 + i ) ^ -n ))
R: the periodic payment
P: the loan
i: the interest rate
n: the period of the payment
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