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Ava G.
  • Singapore, Singapore
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How to compute missing values for ROI and ROE?

Ava G.
  • Singapore, Singapore
Posted Apr 29 2014, 18:18

I'm reading The Millionaire RE Investor and he has a chart there calculating ROI and ROE. However, I'm a little unsure how some values were calculated.

Assumptions:

Property Value: $70,300

DP (20%): $11,249 (initial investment acquired at 20% discount)

Rent and market value appreciation: 5%

Mortgage: 30-year loan at 7.43%

Now on his chart on the first year, here are the values:

Start of Year Market Value: $70,300

Annual Price Appreciation: $3,515

Year End Appreciated Market Value: $73,816

Annual Principal Debt Pay Down: $420

Year End Accumulated Equity: $29,244

Annual Cash Flow: $300

ROI: 37.7%

ROE: 16.7%

I'm curious how Annual Principal Debt Pay Down, Year End Accumulated Equity and Annual Cash Flow were gathered based from the given assumptions.

Anyone can shed some light on this?

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