How to calculate the annual premium return rate of housing?

Methods 1: rental return analysis method

Formula: (monthly after-tax rent-monthly property management fee) × 12/ total purchase price.

The greater the ratio calculated in this way, the more worthwhile the investment.

Advantages: Considering the rent, house price and their relative relationship, it is a simple method to choose "excellent real estate".

Disadvantages: Not considering all inputs and outputs, not considering the time cost of funds, and not being a comprehensive basis for investment analysis. Cannot provide specific analysis for mortgage payment.

Method 2: Rent yield method.

Formula: (after-tax monthly rent-monthly mortgage payment) × 12/ (down payment+mortgage payment in the forward house)

Advantages: Considering the rent, price and the main investment in the early stage, it has a wider scope of application than the rent return method, and can estimate the length of the capital recovery period.

Disadvantages: the time effect of other inputs and funds in the early stage is not considered. Can not solve the cash analysis problem of multiple sets of investments. And because of its inherent one-sidedness, it can not be used as an ideal investment analysis tool.

Method 3: Internal rate of return method (IRR method)

The formula of real estate investment is: IRR= = accumulated total income/accumulated total investment = monthly rent × accumulated rent months during the investment period/mortgage down payment+insurance premium+deed tax+overhaul fund+furniture and other investments+accumulated mortgage payment+accumulated property management fee (Note: the above formula takes mortgage as an example; Do not consider interest payment and agency expenses; Accumulated income and investment are considered during the investment period. )

Advantages: IRR method considers all factors such as investment and income, cash flow and so on during the investment period. Can be used in combination with the rental rate of return. IRR rate of return can be understood as deposit in banks, but the interest rate of banks in China is calculated according to simple interest, while IRR is calculated according to compound interest.