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# How to Calculate ROI as a Real Estate Investor Pt 3 - PowerPoint PPT Presentation

Brian Lee of http://geniustypes.com/ details the third way to calculate ROI for real estate investing. When you leverage other people's money, and keep your costs down your overall returns can exceed 15%!

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## PowerPoint Slideshow about 'How to Calculate ROI as a Real Estate Investor Pt 3' - passiveequity

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### How to Calculate ROI as a Real Estate Investor, PT 3

By: http://geniustypes.com/

Using Leverage for a Higher ROI

• About 30-40% of Profit Available in Profit Deal

• So never be “all in” for more than 70% of the after repair value

• “All In” includes purchase, repairs, and anything costs associated with buying and repairing

• On a \$100,000 property you’d be “all in” for \$70,000 and have \$30,000 in equity

• If you sell it immediately you have to pay transaction costs which end up costing about 10% of ARV

• Now you have 20% net profit

• 20% divided by “all in” gives you a 28.5% return on investment based on equity

• Let’s say you hold this property and it cash flows \$700 a month

• Multiply that by 12 and you get \$8400 dollars a year

• If you divide this by your “all in” you get a 12% ROI on cash flow

• You can make money by borrowing at a lower rate than your ROI

• For example, if you borrow at 12%, and you have an ROI of 30% you get to keep the difference as profit!

• If your out of pocket is low because you effectively leveraged other people’s money, you’ll get an even higher ROI!

• Real estate investors make a profit because of the spread between what they borrow and what they get that money to do

• Visit geniustypes.com for more information on blogging, social networking, passive income, real estate investing, and creative life.