My Awesome, Badass ROI on My First Real Estate Investment Property!

ROI Calculation

ROI -  Return on Investment. ROI calculation:

ROI CalculationLet’s see what kind of ROI the property generated for me with the cash transaction. Two examples below.

Cash Transaction: Year 2010 Cash Transaction: Year 2011
ROI Calculation ROI Calculation
Annual income: $14,400 ($1,200/mo rent) Annual income: $18,000 ($1,500/mo rent)
Total investment: $111,159.88

    • cost of home - $80,000
    • closing cost - $385
    • cost of renovation - $26,200
    • home owner’s insurance - $789
    • property tax - $3,343.88
    • pest control - $1,142 ($500 one time setup charge + 107/every 2 mo)
    • estimated annual repair expense - $1,500
Total investment: $98,959.88

    • cost of home – $92,685
    (80,000 + 385 + 26,200 + 500) minus $14,400 annual income from year 2010
    • home owner’s insurance - $789
    • property tax - $3,343.88
    • pest control - $642 ($107/every 2 mo)
    • estimated annual repair expense - $1,500

As you can see, even paying cash yields a great ROI, something you cannot get by putting your money in the bank or the stock market. Unless you are Warren Buffet or those billionaire portfolio managers, and even they cannot time the market, I would not recommend putting money in the stock market. If you have read my About Me page, you know that I do own some stocks and half are damn losers! But this is another topic for another article .

Now, let’s see the ROI on my cash out finance transaction!!! 

Cash Out Finance Transaction: Year 2015 Cash Out Finance Transaction: Year 2016
 ROI Calculation  ROI Calculation
Annual income: $21,524.05 ($1,600/mo rent + $2324.05 equity) Annual income: $26,248.10 ($1,800/mo rent + $4648.10 equity)
Total investment: $68,769.41

    • down payment - $47,500
    • closing cost - $6,610.57
    • annual mortgage - $7,746.84 ($645.57/mo)
    • home owner’s insurance - $1104
    • property tax - $4,008
    • estimated annual repair expense - $1,800 (the full amount did not get used up)
Total investment: $50,289.85

    • remaining down payment - $32,586.52
    (2015 down payment and closing cost of $54,110.57 minus annual income of $21,524.05)
    • annual mortgage - $7,746.84 ($645.57/mo)
    • home owner’s insurance - $1132
    • property tax - $4754.49
    • repaired damages done by previous tenants - $3570
    • estimated annual repair expense - $500

Some good shit, right! I am certain some of you may argue or question the method I use to calculate my ROI each year. Regardless of what method or how I calculate the ROI, the point is that the ROI for this property is well above any ROI you can get from the banks or stocks.

I would love to know how you calculate the ROI for your rental properties so please comment below. Thanks for reading and have a good one!







Disclaimer: All content is the opinion of the author. No investments is guaranteed to generate income. Please do your own research before you jump into anything crazy.

Credits: wordpress tips, author panos (justpi) 

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