5 year worksheet

[VicChung]

Hi,

I was wondering if REIN or other members had a 5 year worksheet that:

(1) calculates the ROI for every year
(2) ROI every year up to 5 years

Thanks,

Vic

 

[KimFranz]

Hi Vic,

I don`t have a spreadsheet on hand, but here is the calculation:

To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

The return on investment formula:

Good luck,
Kim

 

[Mecheng]

QUOTE (KimFranz @ Jun 10 2010, 06:27 PM)

I`m interested in seeing how others define the values they use in this formula.
Here is my definition:

Cost of Investment - All capital used for investment
I have heard some people define this as the down payment only.
I believe it should be down payment + closing cost + reserve fund, carry cost, etc., etc..
If you use 50K from LOC or JV you have to pay back to whole amount not just the down payment.

Gain from Investment - Capital you receive after property closing
Example is you purchase $200K property (using $50K seed money) and sell for $250K in 5yrs.
Let assume $20K mortgage pay down and $5k positive cash flow added to the $50 appreciation.
Total of $75K + $40K down payment returned - $15K (assume closing costs) you gat a cheque for $100K.

So ROI will be: (100-50)/50 = 100% total or 20% per yr over 5yrs.

This does not include any capital gain tax you must pay and therefore will not actually have as spendable profit.
Does anyone subtract capital gain tax from there "Gain from Investment"?

I guess it depends on what you`re trying to achieve with your ROI calculation.
If you want to determine the actual cash in hand / spendable profit you will get from the venture or...
create some impressive sales pitch number in order to tell other how great the investment you made was.

Anyone have a different definition? For what purpose are you using your ROI calculation?