Calulating ROI
Does anybody know a simple formula to calculate ROI and the estimated ROI in the future of the property?
What can be more simpler than Net Profit/Total Investment=ROI?
As for the future it depends what assumptions you make about the Net Profit.
We usually call in Cash on Cash. But just take you're Cash Flow (which you get from taking your net operating income and subtracting your debt service) and then divide that by your overall cash investment. So if you made (or think you'll make) $10,000 a year and you have $50,000 of your own cash into the deal, then it's $10,000 / $50,000 or a 20% cash on cash return (or ROI).
@Andrew Syrios, do you include money you pull out of another property, HELOC or Cash-Out Refi, as part of your overall cash investment when you calculate your ROI. I am analyzing a mixed use commercial. I am going to cash out refi on one of my other properties for part of the down payment and take on a partner for the other part of the down payment. I am going to pay the private money loan back on a 5 year balloon. So would you include the private money and cash out refi used for the down payment in the cash on cash return calculation? Thanks in advance.