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Old August 14, 2003, 04:31 AM
Tom B.
 
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Default Re: What is my return on investment?

> If I buy a house without using any of my own
> money (No money down)... what is my return
> on investment? Infinity?

No such luck.
You borrow X amount of dollars.
BUT you have to pay it back.
It's not a gift.

So if you pay back 7% (interest rate) of your total borrowed money in a year,and the property has increased by 10%, you made 3% of total borrowing LESS expenses during the year.

Figure another 1% on top of the interest rate you are paying back for maintenance, management etc.

If the property decreases in value short term AND you have to sell, you lose money.

Infinity means you get a gift and don't have to pay back.

But the beauty of this increase in property value is the 8th wonder of the world--compounding. Basically, the longer you wait, the more you make exponentially (not linear!!).

Cheers,
Tom B.
 


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