This is a great post. Would you be willing to share your spreadsheet? Always looking to improvetczernec wrote: ↑ Many people needlessly overcomplicate this. Assume we don't care about cashflow (I don't), all we need to make RE a very interesting and viable investment is a >= 0% ROIC (meaning negative cashflow is offset by principal paydown). Why? Because real estate investing, at least in my view, is all about capital appreciation - not crazy Toronto-area appreciation, but even just inflation-level appreciation. You put 20% down, and over the *long term* you can assume appreciation of at *least* inflation. Let's say inflation is 2%. Due to the 4:1 leverage (20% down), you're actually making 10% per year. Compounded. That alone is the #1 selling point of RE investing. You can't cheaply 4:1 leverage in any other market that appreciates reliably with inflation. And historically, average capital appreciation is at least double CPI inflation - so that 10%/year becomes 20%/year.
Now, how much 'gravy' you add to your returns is definitely a good topic. And cashflow realistically is important to people because not everyone wants to (or is able to) dish out cash every month just to build equity. So look at cashflow, use investment calculators, it's all good - I use some insane spreadsheets to calculate all this stuff too. But when it comes to the thesis of RE as an investment, it's the growth via capital appreciation, at or above inflation, leveraged, that is the secret sauce.
