Maybe it will look trivial to some of you and yet know there is a lot that the subject is not clear to them, ...
Maybe it will look trivial to some of you and yet know there is a lot that the subject is not clear to them,
Shares content of a post I posted today with details:
What is a yield and how is it calculated?
Many people I talk to ask me, how do I know that the deal pays off?
In order for us to examine the viability of a transaction, one of the significant things we would like to know is what is the expected yield?
So what is yield and how do you calculate it?
So, the yield is:
The profit we make in percentages depends on the amount we invested
And usually calculate it on an annual level
That is, you take the profit throughout the year after deducting expenses and dividing by the amount we invested.
It is important that we know all the expenses we have for the investment so that we can know how much we ultimately have left in our pocket, that is net income.
Let's look at a numerical example:
Suppose we bought a house at $ 100K
We rent it at $ 1400 per month
What will be the return?
Annual income: 1400 12x
= $ 16,800
Investment Parts 16,800 / 100,000 = 0.168
Ie almost 17% yield
But, this is the gross yield and not what actually will remain in our pocket
So what will we have in our pockets?
Of course, you have to take into account the expenses and add them to the calculation
And the new calculation will be:
Property cost $ 100K
Monthly rental $ 1400 per month
Operating expenses $ 400 per month
Which means an income of $ 1000 a month after expenses
What will be the return after expenses?
Annual income: $ 1000 12x
= $ 12,000
Investment Parts 12,000 / 100,000 = 0.12
Ie 12% yield
Post is very important.
Thanks a lot for all the knowledge…
I just did not understand what the 4050 is…
Thanks 🙂
There are many more things and yield unfortunately not computers by 12 months computers by 11 and it is at best that the property is rented out quickly and there are no additional associated costs for finding a tenant additional expenses for renovation etc…
What about a breakdown of real interest versus nominal interest?
??? Thanks for the demo I am interested in calculating yields on flips less I am interested in renting more to renovate and design and sell
The 4050 have now moved to the side of the losses of Hallsey ????
The deduction of the 4050 is over
It seems to me that you did not put all the expenses into operating expenses. There is no situation that only 28% of the expenses are. Have you included the VANANCY LEASE FEE?
Thanks Effi.
Definitely important! Thanks!???