Most property investors undertake some form of analysis before
they make an investment decision. They
"Crunch the numbers" to forecast profit and in some cases they use
quite sophisticated models to predict investment returns out some 10 years or
so.
This typically would involve estimating the future rental stream, expenses,
interest rates, and a resale value of the property. The timing of those future income steams and payments are then
adjusted by what known as a discount rate
to take account of the time value of money - because money in hand can be
invested so net cash flow received sooner rather than later is worth more.
