Calculating the Return on your Property Investment

by Emile Grobbelaar


Property Investment

As all of you know, at Wealth Masters Club we advocate that property is the best investment there is. The question is, how would you know which property deal is better than any other investment?

On our new property page, https://www.destinataholdings.com/what-we-offer/property-investment/, you will see a lot of automated calculations and information when you click on the "View Deal Planner" button on an available property, that changes as you edit the details on the deal. Things like:

  • Nett ROI PA
  • RVR
  • Return on Cash, etc.

How does any of this help you to decide whether it is a good investment or not?

Here's an explanation of these terms:

RVR – RENT VALUE RATIO

This is a calculation of the Gross Rent Amount per Month as a percentage of the selling price of a property. The norm is around 0.8% to 1% and is sometimes used to establish a value or selling price of a property but RVR is not that important as it does not take any costs to the property in account.

NETT ROI PA – NETT RETURN ON INVESTMENT PER ANNUM

This is the calculation that will show you whether it is a good investment or not and can be compared to other investments. The Nett Return on Investment (ROI) is calculated by calculating the nett income for the year (Rent less Rates less Levy) as a percentage of the Selling Price. This calculation is much more important than RVR as costs like the Monthly Levy can be very high and can “kill” the deal, even though the RVR is very good.

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