I’m weighing a Warsaw studio with a modest current yield against cheaper, higher-yield alternatives that appear less liquid. The Warsaw case rests mainly on stronger employment and transport fundamentals, but I don’t want “future appreciation” to become a convenient excuse for weak numbers today.
My current idea is to require a minimum net cash return before assigning any value to possible growth. I’d calculate that return after a realistic vacancy allowance, management costs, maintenance reserves, insurance, property tax and financing costs, then stress it for higher borrowing costs and tenant turnover.
For those who have faced a real decision deadline, what minimum test did you use? Did you require positive cash flow under a stressed scenario, or accept weaker income when the location and likely resale liquidity were better? I’m especially interested in which assumptions you refused to relax when the deadline made the appreciation story feel more persuasive.
My current idea is to require a minimum net cash return before assigning any value to possible growth. I’d calculate that return after a realistic vacancy allowance, management costs, maintenance reserves, insurance, property tax and financing costs, then stress it for higher borrowing costs and tenant turnover.
For those who have faced a real decision deadline, what minimum test did you use? Did you require positive cash flow under a stressed scenario, or accept weaker income when the location and likely resale liquidity were better? I’m especially interested in which assumptions you refused to relax when the deadline made the appreciation story feel more persuasive.