Calculation Methods And Evaluation Of Several Return Rates

The RRR formula is: (after tax monthly rent monthly property management fee) * 12 / total purchase price. The larger the ratio, the more worthy of investment.

Advantages: considering the relative relationship between rent, housing price and the two factors, it is a simple way to choose "real estate".

Disadvantages: not considering all inputs and outputs, without considering the time cost of capital, so it can not be used as a comprehensive basis for investment analysis.

No specific analysis can be made for mortgage payments.

The formula of rental rate of return is: (after tax monthly rent - Mortgage monthly contribution) x 12 / (the first mortgage + the mortgage in the time of advance).

Advantages: Considering rent, price and the main investment in the early stage, it is more applicable than the RRR analysis method, and can estimate the length of the payback period.

Disadvantages: not considering the other investment and the time effect of capital.

The cash analysis problem of multiple sets of investment can not be solved.

And because of its one-sided nature, it can not be used as an ideal investment analysis tool.

The IRR method (internal rate of return) real estate investment formula is: IRR = cumulative total income / cumulative total investment = monthly rent = accumulated rental month in the investment period / (mortgage down payment + insurance premium + deed tax + overhaul Fund + furniture and other inputs + accumulative mortgage + accumulative property management fee).

The above formula takes mortgage as an example, does not consider paying interest, does not consider intermediary expenses, and accumulative income and investment are all considered in the investment period.

The advantages of the IRR method include all investment and income, cash flow and other factors during the investment period.

It can be combined with rents.

The IRR yield can be understood as the deposit of banks, but the interest rate of our banks is calculated on the basis of single interest, while IRR is calculated on the basis of compound interest.

The shortcomings of IRR: judging the investment value of property by calculating the value of the property is based on today's data to infer the future.

The rise and fall of rent in the future is unknown.

The simple international assessment method is a simple way for international financial management companies to assess the investment value of a property.

The basic formula is: if the annual income of the property is 15 years = the purchase price of the house, it is considered that the property is worth the value.