Some Ways to Measure Opportunities Real Estate Investment

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Real estate is a lucrative sector. However, appropriate evaluation of real estate investment opportunities is extremely crucial to ensure that the projects turn out profitable and not draining. Realty experts across the globe bank upon certain financial metrics to ensure that a specific investment has the potential to generate good ROI (Return on Investment) and steady cash flow. The most common among them are Net Present Value, Internal Rate of Return, and Capitalization Rate.

Radiant Structures, the best real estate service provider in India, describes these metrics in brief.

Net Present Value (NVP)

NPV helps in analyzing the profitability of the investment. It gives an idea about the value of earnings in the present as compared to the cash outflows in the present.A positive NPV, thus, shows that earnings generated with that particular real estate investment is higher than the anticipated costs.

Internal Rate of Return (IRR)

IRR is another metric used for evaluating the profitability of potential real estate investments. IRR in capital budgeting is basically an interest rate or discount rate that is used to make the NVP of cash inflows and outflows equal to zero. A particular project’s higher IRR indicates lesser investment risks.

Capitalization Rate

Also known as cap rate, it is used for measuring ROI on a specific real estate project. It is based on a property’s annual Net Operating Income (NOI). Cap rate helps in calculating potential returns in comparison to the current market value or trends.

If you are contemplating on investing your hard-earned money on a potential piece of land, then contact Radiant Structures to get the best advice. Our realty specialists counsel clients on changing market trends and real estate scenarios for them to arrive at a worthwhile decision. Visit http://radiantstructures.in/to know more about our on-going residential and commercial projects.