Hello, 

So I was wondering how long you wait before you start calculating your actual ROI on a property...6 months? 1 year? 5 years?

Thanks! 

Chad 

@Chad Lamb Before you buy!

@Larry T. is right, you have to know your numbers before you buy but if your talking about how you look at long term ROI, it depends on how long you plan on keeping the property. If you plan on holding it 5 years, there's no value in your ROI over 10 years. Personally, I am more interested in cash flow because I don't invest in high appreciation areas but if you do, look out as far as you plan on owning.

@Chad Lamb I would guess 3 years is a solid number. Properties that I’ve bought (all multifamily) go through some stabilization costs the first year. High than average turnover, any issues with unpaid security deposits, etc. So the first year (as old leases end and your leases are resigned) is “wobbly” but by the 3rd year you should have 24 months of “normal”. It’s hard to guess around major cap-ex like HVAC and rooting but you’ll know if the appliances were on their last legs, etc. Hope this helps.

Thanks everyone! That makes sense to look at it with a lens of how long I plan to carry it. I'm also in a low appreciation area and plan on holding for a while. Three year averages sound like a good way to start. Thanks for all the input!