ROR for property that is 100% financed.

[Morgan Smith]

Hey, I think i'm losing my mind with this and i'm sure it's a simple answer, but what do you guys use for your ROR for properties that are 100% financed with a HELOC?

Here's my usual deal:

35k purchase
800 a month rent
50% rule - 400 for expenses
350 for HELOC loan (90 going to interest rest going to principal) - 7 year am :(

I'm getting 7% ROR off of the financed amt, but I didn't put any money into it.

[J Scott]

Are you sure you're really asking about the ROR?

Return on revenue (or return on sales) is an indication of operating profit margins (NOI/revenue) and has nothing to do with how a deal is financed.

For a typical rental, using the 50% rule, your ROR is going to be about 50% (not quite, because things like vacancy and capex aren't expensed, but you get the idea).

Now, if you're asking about your ROI or your IRR, those are theoretically infinite, as you are earning a positive return on zero investment (the denominator of the return ratio is zero).