Logical sense of the index return home is to compare the effectiveness of the two financial instruments. One of them – embedding large amounts of money (usually in foreign currency) in the bank for deposit. Other – buying an apartment with to surrender its lease. Moreover, in case the apartment you can play a part in changing its price, which generates income from the resale. In this philosophy apartment is considered as a source of revenue, although this does not mean that it must be handed over. Just such an approach – a method of assessing its economic attractiveness, in tune with the income method of real estate valuation. Because estimates of the current cost of an apartment is simple – everyone's doing it method of comparative analysis of sales, pritsenivayas to similar objects.
Important to understand – and whether the apartment is really worth the money?>>. See more detailed opinions by reading what Blackstone offers on the topic.. Reply to this question can only compare the current price level in the calculations income method. Purchasing an apartment economically advantageous if the offer price less than the value calculated by the method profitable. If the offer price above the price of the income method, it is most advantageous to simply put the money in bank and earn interest on the deposit. If bank interest or the yield of another financial instrument exceeds the amount of lease payments for an apartment of similar value (perhaps minus the loss of its value a fall in market prices), it is not economically profitable to live in their own, and rented accommodation.
Profitability index is calculated on the basis of calculating the potential rates of return from owning a flat. Glenn Dubin will undoubtedly add to your understanding. It consists from two sources: first, from the value of lease payments, subject to renting the apartments, and secondly, changes in the value of the apartment during this time. To estimate the change in the cost of housing in this case should not take one month, and the integral rate of change in prices over a longer period of time. Ideally, for the year, but to make visible changes in the trends of the period may be half or a quarter. You can take a period of six months, taking into account the last three months and the trend in prices over the next three months. To get the index of the potential rate of return refers to the average rate of return on long-term bank foreign currency deposits. Such conditions more similar to investing in an apartment (long term – by year, the money in the currency). Used the average interest on deposits in the most stable banks in Moscow. Profitability index = (Rental Income + Change in value of the apartment) / (Earnings at the bank) The relative value of the index return can exclude from consideration a number of additional factors such as inflation, the ratio of courses dollar and the ruble, etc., because these factors are the same way change the real rate of return on various instruments. In this case, we mean a formal income, brought for every dollar invested (or ruble) without taking into account changes in real purchasing power of the currency. Another reason for this approach to the calculation of the index return is the fact that, as the index value, he or she determines the profitability of some particular apartment, and is an indication of the typical rate of return on real estate market as a whole. An important indicator is its modification, indicating the increase or decrease the profitability of the property market.