often have great deals, but you can also find many things you’ll need at rehab stores and liquidators. Your contractor may be able to help you find great deals as well. Speaking of your contractor, you’ll want to keep in touch with them and supervise, as needed. You’ll lose time and money if the work has to be redone, regardless of whether it’s due to a mistake or if it’s simply not up to your standards.
DETERMINING YOUR RETURN ON INVES N INVESTMENT
There are two main methods when it comes to ROIs: the cost method and the out-of-pocket method . Let’s look at a couple examples, keeping in mind that the ROI for both involves dividing the equity position (the amount sold minus the amount invested) by the total amount invested:
(equity position) ÷ total investment = ROI
The Cost Method
• purchase price: $100,000 • renovation cost: $50,000 • total investment: $150,000 • sell price: $200,000 • equity position: $200,000 – $150,000 = $50,000 • ROI: $50,000 ÷ $150,000 = .33 (33% ROI) The Out-of-Pocket Method • loan amount: $100,000 • down payment amount: $20,000 • renovation cost: $50,000 • total investment out-of-pocket: $70,000 • sell price: $200,000 • equity position: $200,000 – $70,000 = $130,000
57
Powered by FlippingBook