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2009
31
Dec

Using ROI To Buy Property

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If you were to talk to an investment manager or financial specialist, you would be sure to encounter the term ROI (Return on Investment). Return on Investment is part of the common parlance in finance circles which refers to the amount of money made on any investment. Return on investment refers not only to financial but also property investments that would need a suitable rate of return to justify the investment. When there are competing avenues of investment, it makes sense to go ahead with the one which promises the highest rate of return with moderate risk. As far as Orlando investment property goes, one can look at various kinds of properties to invest in and maximize the potential ROI.

When you invest in a property and get money as rent, it constitutes the net profit that you get from the property. This is not the same as profit.

Investors would like to get the best rate possible so as to increase the possibility of generating a positive ROI. When conditions are right and a lucrative property is on the market, there are so many people and investors who bid for it competitively. This means that getting the right kind of Orlando investment property that you need is not a walk in the park. The reason is that the number of suitable properties for investment is generally far lower than the demand.

Real estate markets around the world are experiencing challenges related to a property cycle slump. But with these challenges come the opportunities of a lifetime for investors who have clear understanding of finding the proverbial “diamonds in the rough”.

One of the simple and more common dynamics of property investing involves the fact that investors always quote lower in the hope of bargaining for a lower price, while sellers like to quote higher than what they expect to realistically get. Given the fact that capital gains tax kick in, one should be well armed with access to legal advisors, accountants and also financial planners to help out with drafting the deal.

Calculating ROI is quite simple. If you have invested $100 on a deal and want to get 15% ROI, it means that you would be pleased to get at least $115 by the next year. Property investment means commitment of large amount of funds and finances, which also implies that you should be clear not only about the broad contours of the deals but also the specifics in terms of the smallest and most minute aspects.

If you want to calculate the payback period of the deal, you will have to look at the costs which when divided by the monthly benefits which returns the payback period. ROI calculation also means that you take into account the ROI percentage, payback period and the cost benefit ratio.

Now look at the tax aspect of Orlando property investment. If you hold the property for more than one year, the capital gains rate is just 15%. However, if you hold the investment for less than a year and you are in the 35% tax bracket, your capital gains tax rate would also be 35%. Do look at the capital recovery time period too, as this is the time which you would have to wait out to get enough benefits to get back the investment principal amount. These are some of the important aspects that you should not forget while considering investment in property.

Jack Chambers is a local resident in the Orlando area. He instructs people on Orlando investment properties while focusing on popular Orlando destinations.

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