In making a decision what is best to take in to consideration your YEILD on the investment or ROI
If you’re talking about a rental property business, you need equity and CASH FLOW. Businesses don’t survive long when they have negative cash flow.
Good Luck,
Mike
rcallstar24,
Yield is the ratio of the net operating income generated by a property, divided by the cost of the property.
There are many versions of ROI. One commonly used is the Cash-on-cash return which is the ratio of the annual cash flow generated by the property divided by your out of pocket investment in the property.
If you are using money out of your pocket to purchase your investment, then you will want to consider the ROI. Rental property investors are buying the cash flow. When comparing different investment vehicles compare the cash on cash return to determine which investment generates the greater return.
If you are buying your property with none of your own money, then the ROI is infinite. In this case, your only basis for comparison is the cash flow. You can still do a yield calculation though I don’t know how relevant it will be in making an investment decision between two cash flowing properties that you purchase with none of your own money. The purchase decision will still come down to which property generates the greater cash flow.