Posted by Rich_WI on March 25, 2014 at 16:11:34 from (50.50.82.205):
In Reply to: More on Cash Rents posted by Nathan (SD) on March 24, 2014 at 20:23:57:
Quoting Removed, click Modern View to see
Nathan, you are correct, there are different ways to calculate your investment. The second way that you mentioned is commonly called "cap rate". Its just a quick and dirty way to place a value on investments. I can quickly and easily place a value on an apartment, restaurant or even farm land. Once I buy one of those investments, depending on how I structure and pay for things, it changes my investments actual return. When looking at loopnet, cap rate is used simply because return changes based on how you structure things.
After I own something, a common way to figure ROI is like your first example, called "cash on cash". Just like you said, your actual cash investment is divided by the cash it returns.
I find it odd, but funny, that somebody is so dumb as to criticize you by saying you should not be an investment advisor yet they dont know simple, first year of college terms like above. In fact, I think this stuff is being taught in AP classes now days. Odd I say, but still funny....
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