Please help me calculate my cap and roi

[Dennis Robinson]

I purchased a single family home for 590k (20%down) in southern California and Reno cost was 50k. I added an ADU for $115k cash. It collects total 5k monthly rent. Please help with roi, cap rate or whatever you would consider the most important metrics. Thank you

[Sebastian Marroquin]

500 x 20% : $118K down payment + closing costs ($10K ball park): Total to purchase $128k 

Reno: $50k + $128k : $178k 

ADU: $115k plus $178k : $293k All in

Rents: $5k x 12 months: $60k 

Cash on Cash return: 60k divided by $293k : ConC ROI: Gross : 20.4%

(I'm sure you will have maintenance expenses, capx, PM etc etc ) and you will also have tax sheltering and deductions: plug in all numbers to get an accurate number). 

Total ROI:

purchase $590k + ($118k down payment) $175k (all cash in) : $883k 

60k divided by $883k : 6.79% return 

Equity: Depending on city and depending on how nice the renovations are and how nice the ADU is: (also depending on comparable sales: bc you could have over paid for the home initially for all we know... )

Let's assume that you did not over pay for the fixer at $590k 

After renovations and the ADU: you are all in with the home at $765k (bc you will be getting back the $118k down payment)

and the home may be worth about $850k to $900k (a lot of factors could change this) but you could have around $50k to $100k new equity. 

(questions: how big is the home? How big is the ADU? Was the ADU new construction or a portion of the home or a garage conversion? What city did you buy in?)

I like this strategy and something we plan on doing more of this year in 2021! Congrats!