How to Calculate ROI as a Real Estate Investor, PT 3 By: http://geniustypes.com/ Using Leverage for a Higher ROI

“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 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 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 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 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

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