Personal Finance

How to calculate rate of return in real estate?

  • Last Updated:
  • May 6th, 2018 3:22 pm
[OP]
Member
Apr 22, 2008
385 posts
40 upvotes

How to calculate rate of return in real estate?

Here's the scenario. In 2005 we bought a house for 350K. In 8 years we can sell it for 750K. The mortgage through all period was 3% and payment was 1200 bi-weekly. Total maintenance/reno/upgrades and other spending were 6K a year.
1 reply
Deal Fanatic
Nov 2, 2013
5246 posts
1114 upvotes
Edmonton, AB
If you're looking for ROI (return on investment) and comparing it to others, how much of your cash did you put down/invest into it?

e.g. If you put $70K + 10K in odd fees, taxes, etc. down, that's $80,000.
In 8 years if you're up $400,000, means you're expecting $50,000/year appreciation.
Maintenance/renos/etc. -$6,000/year.
Mortgage interest: -$7,431/year w/ 20% down

Each year, you're ahead by $36,569 (before commission, legal fees, taxes, etc.)
Your return is 36569/80000 = 45.7%

That is, per dollar you've sunk in to get into this place, you're ahead by $0.457.
Consultant & Class 1 Operator
- Oilfield Services - Operations - IT - Recruitment - Financial - Safety -
Serving Western Canada since 2013

To network, or for my website and personal blog, shoot me a message.

Top