Underpants..... Profit (IRR & NPV)

Discussion in 'Commercial Property' started by Scott No Mates, 9th Apr, 2021.

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  1. Scott No Mates

    Scott No Mates Well-Known Member

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    It's appears that many property 'investors' simply do not understand the terms Internal Rate of Return (IRR) or Net Present Value (NPV) whereas those investing in equities have had some exposure to these terms.

    These methodologies are based on determining the value and return of investment decisions in today's values. This also enables you compare apples and oranges eg shares, development sites and buy/hold property on the basis of initial investment, returns and realisation (sale).

    As a tool, it is unnecessary to consider tax impact as everyone has different tax effects but remains just as important and can't be compared across different investors who non-resident vs permanent residents, high income earner vs tax-free superannuants.

    Linky

    The example provided is simplistic however more complex analysis can be undertaken taking into consideration any expenses (such as purchase costs/stamp duty/legals, budgeted expenses eg rates/insurance/periodic maintenance/refurbishment etc or sales costs).

    These methodologies can be just as easily applied to residential investment.
     
    Last edited: 9th Apr, 2021
    kmrr, tk421, SmileSydney and 2 others like this.