What is Considered a Good Return on Real Estate Investments?

It can be overwhelming and confusing to know if you are getting a “good deal,” or investing in property that will be worth it in returns. There are few simple calculations that real estate experts recommend considering before diving into real estate investments in St. George.

An important thing to consider is whether the Net Operating Income against your investment cost. This is also called the Capitalization Rate or Cap Rate. This comparison is very effective if you pay cash for the purchase, but doesn’t work so well if you finance the purchase, and many buyers do. Another determining factor is examining your cash flow against the actual cash you invested. The higher the percentage when you compare these two, the better your return.

The complete calculation to consider is called Return on Investment with Appreciation. This takes into account your cash flow before taxes, the reduction of your principal, cash invested, taxes saved, and appreciation of the value of the property. Cash flow, principal reduction, and tax savings should be added together and then divided by your cash investment and appreciation. The higher the percentage that you formula produces, the more profitable your investment property is for you in the St. George market.

What is Considered a Good Return on Real Estate Investments?

Real Estate Investments

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