How do you calculate ROI - new to real estate

How do you calculate ROI - new to real estate

Real Estate Agent · Philadelphia, PA · Member since 2022 · 5 posts · 6 votes

Hi everyone, I've gotten into real estate recently but must admit that my knowledge is of a novice level. Just curious how you, as an investor, calculate ROI. I know the basics of it in terms of a purchase price, rehab, and ARV, but I know that there are other factors to consider. Is there a set end-all-be-all way to calculate? Or does each individuals calculations look different? Would love to know how you come to a specific number figure - if you can even explain in a single post.

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  • Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
    4y

    Sounds like you are looking for the math on if you were to do a house flip. There are a few more expenses than just the rehab.

    PURCHASE PRICE

     +Inspections

     +Lender fees (points, etc)

     +Rehab

     +Mortgage Interest

     +Property Taxes

     +Insurance

     +Utilities (power, water, gas)

     +Maintenance (pool, landscape, etc)

    +Staging, if applicable

    =PURCHASE, BUILD, & HOLDING COSTS

    After that you take your sales price, subtract out commissions and seller closing costs, then subtract out the figure above, and now you have your net profit.

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