How to calculate roi as a real estate investor pt 3
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How to Calculate ROI as a Real Estate Investor Pt 3 - PowerPoint PPT Presentation

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Brian Lee of 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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How to calculate roi as a real estate investor pt 3

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


Using Leverage for a Higher ROI

All in
“All In”

  • 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

Roi on equity
ROI on Equity

  • 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

Roi on cash flow
ROI on Cash Flow

  • 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

Combined roi s
Combined ROI’s

  • If you add your ROI from cash flow and your ROI from equity together you get about 40%

  • 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

Helpful links
Helpful Links

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

  • For more information on calculating ROI as a real estate investor click the previous link