In improved properties another distinction is, however, quite commonly found. The profit on the value of the property frequently differs from the profit on the actual cash investment. This is clearly shown by the following example:
If an office building be bought for $500,000, of which $200,000 is represented by a mortgage bearing interest at 5% per annum, and the net rents are $60,000, the taxes and insurance $10,000, and the cost of maintenance, repairs, service, insurance, etc., $15,000, then the net income is: $60,000 - ($10,000 + $15,000) = $35,000, which is 7% on the cost of acquiring; whereas the return on the cash invested is $35,000 - (5% on $200,000) = $25,000, which is 8.3% on the cash invested.
These figures show the importance of recording clearly and in one place all particulars regarding each piece of property, in such a manner as is provided for in the real estate ledgers.