Personal Finance

How to calculate rate of return in real estate?

  • Last Updated:
  • May 6th, 2018 3:22 pm
Apr 22, 2008
388 posts

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.
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Deal Fanatic
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Nov 2, 2013
5322 posts
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.
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