Originally Posted by
Snoopy
I really don't understand what your post is on about SailorRob. You say I have a net profit margin of 50%, which I have confirmed by my calculation below
My net profit rental margin is: (0.72x$20,000)/$28,600 = 50.3%
Then you say I can't have a net profit of 50%, even though you have just done the calculation yourself, confirming it to be true!
Of course none of this is concerned with the cost of acquiring the housing asset in the first place. In the case of housing that is what dampens down your investment return. Because the cost of acquiring a property is high. But that doesn't change the fact that the net profit margin in this housing exercise is 50%. Obviously of you refurbish the kitchen you might be down $20k for that year eliminating your profit for that year. But you are probably increasing the price you would get for your house if you sold it by doing that, and such a refurbishment would have a 20 year life. Over 20 years I have already allowed for $100,000 in capital expenditure and maintenance. So I think my figures are about right.
The profitability of this exercise is the strongest possible reasoning behind me making money, not 'losing money' as you claim.
SNOOPY