Measuring ROI is a matter of hard facts. Forget every single word you’ve ever heard about “creative valuations”, this is all about real money for real investment properties.
The methods are necessarily very pragmatic:
Raw income- The number of units and the exact amount of rental income received.
Vacancies and lost revenue- Another hard number, based on real loss of income.
Maintenance, rates and other costs- Natural overheads, but don’t assume deductibility has anything to do with real revenue at this stage, because you’ll blur the ROI values.
The result of these calculations is called NOI- Net operating income.
Divide the NOI figure to get your ROI percentile. If the NOI is worth $100,000 and the property is worth $1 million, the ROI is 10%.
The percentile is also the performance measure. 10% is benchmark best practice, below is losing money, and above is outperforming. Just make sure you get your numbers right!
Source: http://www.ehow.com/how_4894033_determine-return-investment-investment-property.html
{ 0 comments… add one now }