OfflineAs a real estate investor the realistic return on investment is one of the main initial factors to consider. The return on investment is essentially the amount of money the property will make through capital appreciation and yield returns prior to selling.
If a property is unlikely to provide the expected returns to make it a viable investment opportunity in the amount of time the buyer wishes to maintain the property, another property or location should be considered. Taking into account the annual maintenance fees and taxes, along with the associated selling costs, is essential to ensure correct calculations are made.
The return on investment is one of the areas where risk factors come into the equation. Emerging markets have traditionally provided the highest returns in the shortest period of time, while the established markets provide slower, yet more stable and less risky returns.
The current world real estate market situation has changed many investor perception of the fast returns potential of emerging markets. This has led to an increased interest in the secure returns of established markets.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Hey Craig,
Long time no talk. Can you provide numbers here so that I can understand how to calculate this correctly? I keep getting it confused. Ba-duh! I have an investor who wants 25% ROI.
Thanks.
Denise
Allen & Denise
Denal Enterprises
The Return on your Investment (ROI)is calculated as the ratio of your equity and your investment.
for example:
You purchase a property for $100K, put $10K of your own money; property FMV is $140K; your ROI is 40K/10K x 100%= 400% return
or
You buy property with investors money for 80K, rehab, holding costs, your fee, etc. 20K (total cost 100K); FMV is $140K; investors ROI is 40K/100K x 100% = 40% ROI.
Hope this helps,
Valerie
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
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I do it it a different way. I do the Gain from investment-Cost of investment divided by the cost of investment. So if the total cost of investment was
100k including rehab and holding costs and the sale price was 140k;
140000-100000=40000/100000=.4 or 40%
Cathy B
Follow my progress at:
http://www.deangraziosi.com/real-estate-forums/investing-journals/44397/...
Cathy,
You are correct. Except you did not figure the sales costs on the $140,000.
So lets say 8% commission and closing costs. That is $11,200 off the $140,000
So your investors ROI is actually 29% not 40%
Denise,
It really is simple. you take all of the buyers expenses, Purchase price, rehab, holding costs, insurance. ETC. ANY money that comes out of your buyers pocket. His total cash investment. Divide that by the NET profit the investor will receive at closing = his ROI.
Hope this helps!
Michael Mangham
MD Home Aqcuisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
to be able to calculate this is to follow Michael's example above and put the formula in an Excel spreadsheet so you can perform the calculation easier for each successive property.
Always Looking to Acquire Houses | Always Looking to Amaze Investors