By guest contributor Gerald Tay
In the first part of this article, we talked about the importance of looking at numbers instead of location when buying investment property. There are two vital numbers that novice investors and speculators frequently ignore: the Cash-on-Cash Return and Internal Rate of Return. Let’s now take a closer look at those two vital numbers.
Cash-on-Cash Return (COCR)
Most novice investors and speculators look at net yield only. This can be highly deceiving as it does not tell you if your money is safer in the bank or if you can get higher returns in other investments.
The calculation of net yield is typically based on the purchase price, rental income and net of all expenses except mortgage payments. The difference between net yield and COCR is that the latter factors in both the principle payment as well as the interest on the mortgage loan, including ...
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