There's more than one way to shine a penny - Anonymous
As an investor, wouldn’t it be great to have a single metric that could tell you if a property is a good investment or not ?
While this is a dangerously simplistic question to ask, we will attempt to answer a more precise question.
How do I evaluate the returns generated by a potential investment ?
There are several bottom-line metrics that you could use to evaluate the returns generated by your real estate investment. We will be discussing three main metrics in this article:
The Total Return on Investment (ROI)
The Net Present Value (NPV)
The Internal Rate of Return (IRR)
We will go in depth on how to calculate each metric, explain the assumptions and limitations made behind each of them, and provide you with a range to benchmark your metric against.
The Total ROI
The total ROI is a single number that takes into account the price gain you expect to make from selling your investment and the total cash on cash ret