- posted 10 years ago
When buying an investment property, you have a couple numbers you can look at to see how the property is performing.
Cap rate - NOI/purchase price cash on cash - cash generated/cash invested
at the point of purchase, these numbers are easy to come by. How do you perform such an analysis over time?
cash on cash includes cash generated which is "sheltered" by depreciation. It can be considered a return of capital, as buildings do wear out.
So, each year, should you consider cash on cash as the cash generated (including that sheltered by depreciation) / cash invested (including principal payments made to amortize the loan principal)?
Should you consider NOI (net of depreciation)/cash invested (less the depreciation return of capital)?
what should we be doing here?