Simple Rates of Return
Looking for a simple way to determine if a rental property will give you the rate of return you want? This modified annual property operating data may be just what you've been looking for. There are many different rates of return that investor's consider to determine whether a property will generate the yield that they expect. Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better. The first yield we will look at is commonly called the Cash-on-Cash rate of return. It is calculated by dividing the initial investment, usually down payment and closing costs, into the Cash Flow Before Tax. To arrive at Net Operating Income, it is simply taking the gross scheduled income, less vacancy allowance and all operating expenses. From that is deducted the annual debt service which is the principal and interest payment times twelve. The remaining amo