How to calculate roi as a real estate investor pt 3
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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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How to calculate roi as a real estate investor pt 3

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

By: http://geniustypes.com/

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!


Leverage
Leverage

  • 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 geniustypes.com 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


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