A week ago we posted a Deal Or No Deal pop quiz on our Facebook page.
Well, the answers are in, and we are pleased to announce the winner – Q.J. Lee who correctly stated: 5.18%, negative compared to the interest rate 5.49% you get. (-0.31%), no deal.
Working on the return on investment is a skill all investors should know inside out. By analysing the deal before you jump in, you strip away the emotion and look answer the very basic question: Should I or shouldn’t I invest.
A while ago we talked about how to work out your return. For this particular example:
The net return being 5.18% compared to the interest rate of 5.74% means that this particular investment will give you a negative cashflow and would mostly likely be a dud for many investors.*
*Note that we are assuming that there are no improvements to the property value, no insurance costs and no property management costs. In real life this will most likely not be the case but we do hope this quiz serves as a good example for how to work out your return.