1. The article provides a simple approach to making decisions about investing in real estate by calculating the “fundamental value” of a property.
2. Parameters for the calculation include transaction costs, required rate of return, location factor, building depreciation rate, and length of discounting period.
3. The article also provides an equation for calculating expected rental income and suggests that a good investment is one whose price is lower than the estimated fundamental value.
The article provides a straightforward approach to making decisions about investing in real estate by calculating the “fundamental value” of a property. The parameters used in this calculation are reasonable and well-defined, however there are some potential issues with the trustworthiness and reliability of the article.
First, it is unclear where the author obtained their data on transaction costs, required rate of return, location factor, building depreciation rate, and length of discounting period. Without knowing where these numbers come from it is difficult to assess their accuracy or validity. Additionally, while the equations provided are accurate they do not take into account other factors such as taxes or insurance which could have an impact on the overall cost or profitability of an investment.
Second, while the author does provide some insight into how to calculate expected rental income they do not discuss any potential risks associated with investing in real estate such as vacancy rates or tenant turnover which could significantly reduce profits over time. Furthermore, they do not mention any potential tax implications associated with owning rental properties which could further reduce profits or increase costs depending on individual circumstances.
Finally, while the author does provide some useful information on how to calculate expected returns from an investment in real estate they do not discuss any alternative investments that may be more profitable or less risky than buying a property outright. This omission leaves readers without any context for comparison when considering whether or not to invest in real estate and could lead them to make uninformed decisions based solely on this article's advice.