Getting Started With ROI (Return on Investment)
Return on Investment (ROI) in real estate is how you measure the profitability of a property compared to what you’ve invested. It’s essential to understand how to calculate and maximize ROI to make smart investment decisions. Here’s how it works:
ROI = (Net Profit / Total Investment) x 100
Net Profit is the money you earn after subtracting all costs (purchase price, renovation costs, maintenance, taxes, insurance, etc.).
Total Investment is the total amount you’ve spent to acquire and maintain the property (including down payment, closing costs, and any repairs or upgrades).
For example, if you purchase a property for $300,000, invest $50,000 in renovations, and later sell it for $400,000, your ROI would be:
Net Profit = $400,000 - ($300,000 + $50,000) = $50,000
ROI = ($50,000 / $350,000) x 100 = 14.29%
To get the best ROI, focus on:
Location – Buy in areas with high demand and future growth potential.
Smart Renovations – Focus on upgrades that add value (kitchens, bathrooms, curb appeal).
Renting – If the market is strong, renting out the property can provide ongoing income.
Efficiency – Minimize operating costs and avoid overpaying for repairs.
Time – Holding onto a property in a rising market can increase ROI over time.
Understanding ROI helps you make more informed decisions and set realistic investment goals. Want help calculating your property’s ROI or making investment decisions? Reach out to me directly- I am here and happy to help!
Greta Geivett
(206)599-9665
