When real estate prices set up investors like Glocher on their property increases and why should not they? Everyone likes to watch their investments on investments in value-added growth, but it is also important to monitor your cash investment declaration.
During difficult times, investors often landed to take a look at their investments unless you have a good idea to have problems and think they have to do something about it. After all, most people like to hope that bad moments will disappear without detrimental effect.
When a price of a property decreases an investor can be quite dissatisfied with this, but in reality, there has often been a rather important return on their money invested anyway. Not that it helps an investor better feel better if there is no excess equity in the property when the price decreases.
However, it is worth keeping the following facts in mind.
Cash return in cash
Some real estate investors do not understand that when looking at the return on their “investment” (the property), they must examine the return on their money invested, not the return on the price of the original property.
With regard to the increase in the price of the incentive, it is how many new investors examine their returns. They think that if a real estate value of $ 400,000 increased by $ 20,000, they would have done 5%, but the fact is that it is only the increase in the value of the property unless the money has been paid for the full price of the property. Most real estate investors do not pay money but borrow 80% or more of the purchase price of a bank.
Let’s look at this scenario:
$ 400,000 of goods purchased with a $ 40,000 crate of cash
Value of the property now $ 420,000
Cash return ($ 40,000) is $ 20,000 = 50%
These calculations did not take into account fees or other expenses, but are given as an example for real estate investors to realize how to determine their real return. The bank receives its return in the form of interest and the investor receives the profit on the property as his return.
Back to the property
When an investor wants to use the increase in equity in a property as “deposit” for more real estate investments, the increase in property prices is important.
If an investor holds 2 investment properties and they increase by 10% each, they would probably have enough equity to buy another property of equivalent value, based on the bank’s loan criteria at the time.
With knowledge on the performance of cash investments and the knowledge of property price increases, a real estate investor can often always feel quite satisfied with their results and be more positive about the future result of their real estate investments.