Gizzyhardcore has no idea what cash flow is. Op borrowed from parents which is smart if he doesn't pay interest. If his parents wouldn't have given him money then he would have much less returns. Monthly rent- mortgage-taxes-insurance-maintenance-any other fees = cash flow

Annual rent / downpayment & costs associated with buying or mortgage = ROI x10


Any investor would take gizzy as a joke if he ever did real estate rentals with those basic calculations.

In the event this samsbolton ******* has confused some miscers, I will do a simple example for you

Lets say you have $60,000 and you want to buy a rental property for $60,000, that will return you $400 a month. Because this is a simple example, there are no other costs (maintenance etc).

You could spend $60,000 and buy the property outright, with no debt. You investment is $60,000 (thats the money you put in), you get back $4,800 per year (400* 12), so therefore your ROI is $4,800 / $60,000 = 8%.


Alternatively, you might have heard of something called mortgages. You look into it, you find you can buy this $60,000 property by funding it with a 20% ($12,000) deposit of your own money (no **** your own money but this has to be a simple example for that samsbolton retard), and a $48,000 mortgage.

Lets say the mortgage interest rate is 4%. Every year you need to pay $1,920 ( 4% * $48,000) on the money loaned to you to enable you to buy this property.
So in this example, you take in your yearly rent of $4,800, and then have to pay your mortgage interest of $1,920, so you are left with $2,880 profit at the end of the year.

Lets look at how much you invested - how much of your own money you put it. This was $12,000. You get back $2,880 each year. So, by usingleverage(ie the banks money at 4% to fund most of this project), you have multiplied your ROI. Your ROI here is $2,880 / $12,000 = 24%.

Thank me later misc

And Samsbolton, never show your face in this thread again, you are an absolute retard who has demonstrated again and again you have no clue what you are talking about.

Oh dear

http://budgeting.thenest.com/return-...ity-27603.html


Second paragraph. The size of the Investment INCLUDES all borrowed funds.

The reason is obvious to anyone that doesn't live in NZ. Brb take all equity out of a business/house whatever, replace it with loaned funds, brb my roi goes up as much as I want it to.

Brb total schloblocks. Obviously.

Oh dear

http://budgeting.thenest.com/return-...ity-27603.html


Second paragraph. The size of the Investment INCLUDES all borrowed funds.

The reason is obvious to anyone that doesn't live in NZ. Brb take all equity out of a business/house whatever, replace it with loaned funds, brb my roi goes up as much as I want it to.

Brb total schloblocks. Obviously.

google leverage *******.

also your getting confused between the size of the investment, and how it is funded. Your ROI is on the money you put in. Not the money the bank contributes - this is not your money - its the banks money, thats why you pay interest on it.

Your're a clueless ******* - google "leverage".. I dare you... it might make your head explode.

If you don't believe me, read and re read and read again the exmaple I set out for your dumbass. In the example, if you fund the whole thing yourself, you put up $60km get $4.8k back you ROI is 8%.

If you leverage you put up $12k (do you understand the concept of leverage you retard *******???) you get $2,800 back, ROI is 24%.

Sams******* how can you even comment on this thread when you don't understand the concept of debt or leverage?

Depending on context, ROE and ROI can mean different but non-mutually exclusive things. We both know that.
The most commonly accepted measure of return is money earned / money spent, and that doesn't include debt principal.

And what you described isn't schloblocks, it's called leverage. It's borrowing at X in order to earn (X + Y), why wouldn't you do that as an investor? You get to turn your $100K into $500K and invest in more. At the end of the day, you should only care about total profits.

Reference me my post where I said leverage was a bad idea, or even that I didn't understand what leverage is. I'm a landlord, a home owner, and an investor. Stop making sh!t up.

Reference me my post where I said leverage was a bad idea, or even that I didn't understand what leverage is. I'm a landlord, a home owner, and an investor. Stop making sh!t up.

lmao amateur, you don't understand what leverage is.

I have made it clear, in every post, that I define my "investment" as the money on I put in. And I calculate the ROI based on this. If I fund it 100% myself (unleveraged), thats the money I put in. If I partially fund it myself, and the rest with debt, then I am only concerned with the moneyi have put in. The rest I have borrowed - hence that's why i pay interest on it!

You comeback is to link some obscure website that attempts to define ROI / ROE? lol.

how bout you use the wikipedia definition?

return on investment = (gain from investment – cost of investment) / cost of investment[1]


ask yourself this, because it will sum up your investment experience and your ability. If you only put 20% down, what is the cost ofyourinvestment? is it 100%? or is it 20%

or this one... the first one that comes up from google

http://www.inc.com/encyclopedia/retu...tment-roi.html

The general formula for computing the ROI of a business is to divide the company's net income for a period by its invested capital

once again, because you are a dumb english twat, invested capital = the money you put on. How is this confusing you? are you really that much of a twat?

why are you putting so much effort into arguing with a financially illiterate 42 year old?

also, you don't usually include equity/principal payments in yield calculation because that is (i)not cash flow and (ii) makes an assumption about capital appreciation/deprecaiation

"Brb take all equity out of a business/house whatever, replace it with loaned funds, brb my roi goes up"
Tell me what's being implied there, if not to suggest that leverage doesn't improve returns.

Obviously it wouldn't if you simply take the equity out and do nothing with it, but that would be nonsensical.

I have a boring job.

well if you are going for max yeild you would go interest only, so no capital repayments.

But you do include them in an IRR/ ROI calc. The scenario comes out pretty much the same if you sell. Interest only means more operating cashflow as your'e not paying down a loan, but when you sell the asset (the house) you have more of a loan to pay back.

If your'e making interest + capital mortgage payments, obv less cashflow, but you don't have to pay as much of a loan back at the end. Its probably slightly different in terms of IIR / ROI though, but can't be that far apart.

Its just funny seeing how much that guy will stick to his guns when he has no idea what hes talking about. I have done this since 2002, property is where I started, still in it now but on a lesser scale

i meant principal repayments don't = building equity 1 for 1 unless you're assuming valuation of the property stays the same. It's simpler to just calculate yield based on actual cash inflows which doesn't include the equity you build from principal repayments.

"Brb take all equity out of a business/house whatever, replace it with loaned funds, brb my roi goes up"
Tell me what's being implied there, if not to suggest that leverage doesn't improve returns.

Obviously it wouldn't if you simply take the equity out and do nothing with it, but that would be nonsensical.

Reference me my post where I said leverage was a bad idea, or even that I didn't understand what leverage is. I'm a landlord, a home owner, and an investor. Stop making sh!t up.

Yes but we are talking about the roi on THAT investment. Nothing to do with the opportunty cost of the equity you have tied up and what you could make with it if you stuck it somewhere else.. That's a different argument altogether. You ALWAYS break your roi down into individual investments because you want to know which is performing best. Idiot.

lmao amateur, you don't understand what leverage is.

I have made it clear, in every post, that I define my "investment" as the money on I put in. And I calculate the ROI based on this. If I fund it 100% myself (unleveraged), thats the money I put in. If I partially fund it myself, and the rest with debt, then I am only concerned with the moneyi have put in. The rest I have borrowed - hence that's why i pay interest on it!

You comeback is to link some obscure website that attempts to define ROI / ROE? lol.

how bout you use the wikipedia definition?

return on investment = (gain from investment – cost of investment) / cost of investment[1]


ask yourself this, because it will sum up your investment experience and your ability. If you only put 20% down, what is the cost ofyourinvestment? is it 100%? or is it 20%

or this one... the first one that comes up from google

http://www.inc.com/encyclopedia/retu...tment-roi.html

The general formula for computing the ROI of a business is to divide the company's net income for a period by its invested capital

once again, because you are a dumb english twat, invested capital = the money you put on. How is this confusing you? are you really that much of a twat?

if you're a home owner, do you pay property taxes? edit: in the UK?

Not on your primary residence. Just a one off %age on the purchase price (stamp duty)

A rental property is income and taxed at your usual income tax rate (I'm a low tax bracket so its still an OK ish investment for me )

1: why on earth would u not include borrowed funds? What are you to pay the investment back with if its value decreases?

2: YOUR definition is irrelevant. I'm using the same definition used by everyone else, for very good reason.

3: you can't find a link that says you don't include borrowed funds because there isn't one

4: brb 1 plus 1 equals 3 because I say so . I don't care that no one else agrees I'm right you are all innumerate.

5: I've earned mostly minimum wage my whole life but have a net worth a little above half a million $. I'm not rich but I'm very comfortable and know what I'm talking about. Could probably buy your whole country 5 times over.

1: why on earth would u not include borrowed funds? What are you to pay the investment back with if its value decreases?

2: YOUR definition is irrelevant. I'm using the same definition used by everyone else, for very good reason.

3: you can't find a link that says you don't include borrowed funds because there isn't one

4: brb 1 plus 1 equals 3 because I say so . I don't care that no one else agrees I'm right you are all innumerate.

5: I've earned mostly minimum wage my whole life but have a net worth a little above half a million $. I'm not rich but I'm very comfortable and know what I'm talking about. Could probably buy your whole country 5 times over.

Sorry but no where I've read thats reputable says return on investment includes borrowed funds, if it did, leverage would be absolutely pointless, the whole point of leverage is to boost your returns

this guy doesn't understand that if you have a investment with a gross yeild / roi of 8%, and you can borrow at 4%, then leveraging that investment with debt multiplies the yeild / roi.

But then again, another miscer did call him financially illiterate.

You are confused. Show me a website where you don't include borrowed funds.

You're framing the question as if the money from his parents is a true loan with no consideration of foregone income, i.e. he can borrow money fromeitherthe bank or his parents. In that situation, of course ROI will be higher if you borrow at 0% vs. 4%. That's not really the correct approach since the two aren't mutually exclusive, and also because that would technically mean his ROI is infinite because he has no carrying costs due to no interest and he isn't putting any money down (it's his parents)

However, Gizzyhardcore's view is that the parental money is a gift and not a loan - which essentially makes it his own money. In that instance, it obviously makes sense that leveraging increases ROI above the return from self-financing.

google leverage *******.

also your getting confused between the size of the investment, and how it is funded. Your ROI is on the money you put in. Not the money the bank contributes - this is not your money - its the banks money, thats why you pay interest on it.

Your're a clueless ******* - google "leverage".. I dare you... it might make your head explode.

If you don't believe me, read and re read and read again the exmaple I set out for your dumbass. In the example, if you fund the whole thing yourself, you put up $60km get $4.8k back you ROI is 8%.

If you leverage you put up $12k (do you understand the concept of leverage you retard *******???) you get $2,800 back, ROI is 24%.

Sams******* how can you even comment on this thread when you don't understand the concept of debt or leverage?

1: why on earth would u not include borrowed funds? What are you to pay the investment back with if its value decreases?

2: YOUR definition is irrelevant. I'm using the same definition used by everyone else, for very good reason.

3: you can't find a link that says you don't include borrowed funds because there isn't one

4: brb 1 plus 1 equals 3 because I say so . I don't care that no one else agrees I'm right you are all innumerate.

5: I've earned mostly minimum wage my whole life but have a net worth a little abovehalf a million $. I'm not rich but I'm very comfortable and know what I'm talking about. Could probably buy your whole country 5 times over.

you brahs are legitimately making me interested in utilizing leverage...

question... how important is location in terms of an overall factor when leveraging rental properties?
There will always be a high demand for rentals in my community but not much economic growth happening in the town itself, are most returns in RE gained through rental income or market appreciation?




http://forum.obnoxiousbrutes.com/showth...hp?t=173597121

Look it up anywhere on google? Investopedia, (gain-cost/cost)

No where anywhere does 'cost' include borrowed funds, the only cost is the interest payments not the CAPITAL itself.

If i deposit 20k and borrow 480k to purchase a 500k house and sell it for 520k (ignoring all the costs associated with it, as this will impact the return) the return on my investment is 100%.

I started with 20k in my bank account and finished with 40k in my bank account, its that simple.


Edit
Reading back through the thread i think you seem looking at yield (which is based on total asset value) and ROA
ROI is only on your own capital

Edit
After further research I think I can conclude you are correct (roi definition wikipedia) it looks like i am mixing up roi and roe, although at the same time wikipedia does have a few different ways of calculating it, so there may not be 1 true global definition of ROI