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Old 23.11.2020, 09:02
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Phil_MCR Phil_MCR is offline
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Re: Raising of maximum allowable ROI on rental property from 0.5 to 2%

prices are high because rates are low. bond yields are negative and alternative investments are also already at high prices.

since you can lock in rates for 10 years or more, you can calculate the profit from the spread and discount it back and subtract this from the purchase price to give an adjusted price net of the implicit saving from low interest rates.

It's probably still high because I suspect buyers are doing a similar calculation assuming rates stay low forever.

If rates stay low for 25 years, then you can have the mortgage paid off and re-couped your initial investment within that time (or less if you buy at a more reasonable price).
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Last edited by Phil_MCR; 23.11.2020 at 09:15.
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