Quote:
Originally Posted by Radley77
So in the long run, the most important thing you can look at is what is the capitalization rate. In some cases I have found it is less than 4%, which is less than a long term government bond of 5.75% which is 100% safe.
So why invest in real estate that has rates of return that is less than bonds which are totally safe?
It seems like a lot of risk, for a very low rate of return.
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It's really quite simple.
Numbers used for easy Math:
If you have 10,000 to invest:
$100,000 house
$10,000 down payment
$90,000 mortgage
Using your 4% rate
House is now worth $104,000
ROI is 40%
$10,000 spent on bonds
5.75% rate
Investment is now $10,575
Does that make sense?