Just read both of Lonnie’s books, does anyone know who to figure the yield on a cash flow in there head. I know I can use a calculator, but if I can’t at least do it on paper it irritates me. Any help would be appreciated.
NET INCOME divided by DOWNPAYMENT = ROI (return on investment)
Net Operating Income divided by Purchase Price = Capitalization Rate
NET INCOME is money after all expenses including mortgage payment.
Net Operating Income is money before mortgage payment.
Thanks
Patrick has given you a simple forumula. But it does not take into account the time value of money and the decreasing ratio of interest to principal paid on an amortized loan.
For example, what is net income of the 123rd payment of a 360 payment note that you receive 18 months from now and how do you attribute that to a portion of your down payment?
You’ll come up with a number, but you won’t get Lonnie’s numbers using this simplistic method.
Jimbo