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Real Estate

Return on Investment - ROI

What is the cost method of calculating ROI on a real estate transaction?

The cost method of calculating your return on an investment focuses attention on understanding all costs associated with the real estate transaction and ownership, as well as the owner’s equity in the real property. For example, if you purchase the property for $100,000, renovate it for $50,000, and then sell it for $200,000, your equity is $50,000. If you divide the equity ($50,000) by the costs associated with owning the property ($100,000 $50,000), your ROI will be 0.33, or 33%.



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