Discover what net present value is, what it means to real estate investors, how to calculate it, and how to interpret it.
Net present value is the present value of all future cash flows produced by a rental property less the amount of initial cash investment required to purchase the investment property.
Net present value (NPV) considers the time value of money and therefore is a popular real estate investing rate of return. Let’s say you require a 10% yield (rate of return) on your investment. Net present value (with consideration for the timing) reveals whether the cash flow produced by that property would give you a 10% rate of return.
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How You Should Use Net Present Value (NPV) to Evaluate Investment Real Estate
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