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Dom:
>From a GAAP accounting point of view --
If you really sold the property today and legal ownership changed hands,
like the title to the property had been transferred to the buyer for
consideration, and the guarantee of payment in a month is reasonably assured (as to
exactness of amount and collectability), the rate of return of an investment (of
the property) should be computed from the time of purchase to the time of
sale (today). The amount realized at the time of sale is the future payment (to
be received in a month) discounted by a reasonable / marketable interest
rate back to the date of sale. This discounted amount (a present value of a
future payment), not the payment to be received in the future, is used for
computing the annualized yield. (2 weeks).
You see, once the property is sold, you no longer have an investment in
property. You have an investment in a promise to pay (normally in the form of a
promissory note, which may be even secured by the property deed of trust).
You could sell the receivable at a discount on the same day (theoretically)
and receive the present value amount. (2 weeks).
When you sell the property, the investment in the property had terminated.
If you did not sell the promissory note, you had an investment in the note
(paper, not property) at that discounted amount; and the rate of return on that
new investment is the discount rate. (1 month).
The income tax treatment is even more complicated than the above, so I don't
want to go there for now.
Bill
In a message dated 5/11/2005 9:16:00 P.M. Pacific Daylight Time,
mr.ira@xxxxxxxxxxxxx writes:
when the money is paid. That is the only time you can reinvest it for a
continued return. The interim time is called the float. A check kiters dream.
----- Original Message -----
From: dom1_1998
For you math gurus.
To settle an argument. If I bought a property, held it for 2 weeks
and sold it today for a profit and a guarantee to receive the cash a
month later, do I calculate the annualized yield from the transaction
date,(2 weeks), or when the money is paid,(1 month+2weeks)?
TIA,
dom
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