2 questions about the terminology of yields: 1. When you say "I own a rental with yield %X" do you mean...
2 questions about yield terminology:
1. When you say "I own a rental with a yield of X%", do you mean with leverage or without leverage?
2. Does the above-mentioned statement refer to cash on cash ROI or to a situation in which you rent, enjoy rental income and sell after a number of years?
Let's say you purchased a property for 120k and let's say you brought cash to the deal 30k and the rest in financing. Let's also assume that the net flow after expenses is $500 per month. What is obtained is that the NOI is the annual flow (500×12) that is 6k divided by the money the investor brought from home, that is 30k. Hence - NOI=20%
The ROI is the net cash without taxes from the property only this time it is divided by the total price of the property, for example in our example the price of the property is 120k. But here there is no reference to financing and therefore the mortgage repayment is not calculated in the annual cash flow.
WHO WE ARE
It's cash flow and no return.
ROI
It is a return that the asset generates before taking into account leverage and taxes (although quite a few investors calculate it with after-tax profit).
WHO WE ARE
Intended for yield without leverage.
Yield in its basic calculation includes all expenses including leverage,
Cash on cash
Calculated based on income and equity invested.