Newbie Stupid Question - Posted by Steven

Posted by John Behle on May 06, 1999 at 16:01:30:

I hit the wrong button and didn’t notice my name didn’t appear until after I posted. You should know who to throw rocks at for the obnoxiously long and complicated answer to a simple question.

Newbie Stupid Question - Posted by Steven

Posted by Steven on May 05, 1999 at 16:06:13:

Is yield the same as return on investment?
just wondering.

Different terminologies and formulas - Posted by Email question

Posted by Email question on May 06, 1999 at 15:58:52:

Yield generally equates to the term “IRR” or “Internal Rate of Return”. This is one financial formula only. There are more accuate forumlas (IRR is very flawed) like the “FMRR” or “Financial Management Rate of Return” that takes into account the SFR (Sinking Fund Rate) and RR (Reinvestment Rate).

So, there’s the most accepted form of yield and the more accurate form. Another is the “Cash on Cash” return. This return solely takes into account your cash investment into a deal and is more accurate.

You also have yield figures based on “After Tax” that gives you the ability to factor in tax savings and consequences. That way you could compare an annuity with a tax exempt municipal bond.

We can’t get into the two one week courses that cover this (CCIM courses), but there are definite differences. It isn’t just a simple yes or no. In real estate, the most common are the IRR and Cash on Cash return calculations (which can be the same). The best calculation would probably be an after tax, cash on cash, FNMRR rate of return that included a termination or disposition of the asset and total return of capital and profit.

I feel like I just explained the chemistry of Koolaid, but hey I spent thousands for those courses. Just once I ought to be able to re-gurgitate some of it.

The result is the same - Posted by Dave T

Posted by Dave T on May 06, 1999 at 12:06:43:

It’s a matter of perspective. If you are the investor you GET a return on your investment. The investment GIVES, or “yields”, a return to the investor.

In the end, the dollar amount is the same. An investment yields, or pays, an investor a certain amount usually expressed as a percentage of the amount invested. The investor receives the income that the investment “yielded” and, when expressed as a percentage of the amount invested, it is called the return on investment.

Yes… - Posted by Sean

Posted by Sean on May 05, 1999 at 18:21:26:

If someone says they are getting an 18% yield that’s the same as making 18 percent on your money.