Tuesday, February 14, 2017

Investment Formulas for Rentals

Investment Formulas for Rentals

Ever think if your investment property is really going to make you an investment? Profitability index is a method real estate investors use to compare the initial cash required to make the investment to the present value of all its estimated future cash flow benefits. 

PI = Present Value of all Future Cash Flows / Initial Cash Investment

4 Easy Steps
  1.  Calculate the total dollar amount
  2. Designate a discount rate
  3. Calculate the present value
  4. Divide the total present value

  •  1.0 - achieved desired rate of return exactly
  • > 1.0 - exceeded your goal
  • < 1.0 - failed to achieve your goal

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