1 / 7

How to Calculate ROI as a Real Estate Investor

Brian of http://geniustypes.com/ shares two more great ways to calculate ROI. Last week we learned about ROI based on equity, but real estate makes you money a variety of ways. Calculate your ROI based on cash flow and add it to ROI based on equity for a more complete idea of what your money's doing.

Download Presentation

How to Calculate ROI as a Real Estate Investor

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.


Presentation Transcript

  1. Calculating ROI as a Real Estate Investor Part 2 Balance Sheets and Income Statements By: http://geniustypes.com/

  2. Two Types of Financial Statements • Both individuals and pieces of real estate have financial statements • A house’s balance sheet has to do with equity, while a person’s has to do with net worth • A house’s income statement records cash flow, a person’s records money from their job.

  3. How Equity and Cash Flow Impact Personal Finance • The second you buy a house and rehab it, it’s financial statements attach themselves to your own • For example, if the house you buy has $30,000 in equity, your net worth increases by $30,000 • If you property cash flows $300 a month, $300 are added to your personal income

  4. Why You Must Buy Real Estate “Correctly” • A property can positively affect your personal income and balance sheet, but it can also have a negative impact • If you buy a house that’s upside down or has negative cash flow, your net worth and income will decrease • Must buy real estate correctly to see positive affects on ROI

  5. ROI Based on Equity and Cash Flow • If you have $10,000 invested in a property and the equity in the house is $30,000, you have a 300% ROI • But if this house also cash flows $200 a month, that’s $2400 added to your income (24% ROI) • These different ways to calculate ROI create conflicting calculations of return on the same house

  6. Add Them Together! • If you have your ROI based on equity and your ROI based on cash flow add them together! • This is your total ROI (not counting ROI on other ways real estate makes you money like tax advantage) • Remember when you buy a piece of real estate, it’s financial statements attach to your own

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

More Related