Measuring Performance / Appreciation

[Sanjay Patel]

Hello, 

I would like the forums opinion on how you are measuring your profit in terms of price appreciation for buy and hold properties. For example, I recently sold a rental that was in my family for 35 years. Just to put example some numbers around it, net of all commissions, the price appreciated by a factor of 3 (e.g. $10k to $30k over the 35 year period).

My question is : would you measure your success based on compound rate of return (looks lower) or based on a simple interest model (looks better)? 

Ideally, I would like to be able to compare returns future buy and hold real estate, with my buy & hold stocks.

I understand that there are other important parts to this model (depreciation, expenses over time, etc.) but I want to start with the basics (just price appreciation).

Many thanks for your opinion.

Sanjay

[J Scott]

Originally posted by @Sanjay Patel:

My question is : would you measure your success based on compound rate of return (looks lower) or based on a simple interest model (looks better)?

Given that you're not receiving any interest (or any benefit) from the appreciation until you sell, the most accurate way of measuring return would be using a compound return calculation (IRR).