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Wednesday, September 01, 2004

It's done! Here are the final results

Just got a call from the escrow company and they are wiring funds to me this morning. I'll get just under $27K from this deal. Not bad!

Here are the details:

ROI for year 1: 22.1%

ROI for year 2: 30.0%

These figures are looking at my monthly cashflow only. It does not include gains from selling the property. The reason I broke it out into two years is because I refinanced after 1 year to increase my cashflow. The actual ROI figure for year 2 is lower than it really was. This is because that figure was calculated including the couple thousand I put in during the last 30 days to fix the place up for sale. If I was still renting, many of those expenses would not have occurred and if you exclude them, the year 2 ROI jumps to 37.9%!

And finally...

The overall, 2 year ROI for this property, including the gain from selling it: a whopping 271.8%!!


7 comments:

misteropus said...

Well done! The whole real estate thing is feeling more and more like a bubble to me (property in central CA especially) and I think it was a good move to take the profits now.

ishaha said...

HI SHAUN,
good to read the whole deal. I am not an active poster but i am an active reader...i am not doing the same as u, but i own a couple of properties in michigan and 1 in orlando...all r rented and they take care of themselves(financially)....as i am still in the rat race, i dont much time to do the short sale (dont have a whole lot of idea), foreclosures....i am really amibitious and will like to certainly get out of the rat race within the next 10 yrs or so (i am 27)....please advise me what should i do since, though i own the houses i am not seeing any high ROI... should i take some new route since i need fast track to reach the goal

Shaun said...

Unfortunately, I cannot give advice tailored to a specific person on a blog or in email. However, I think you've already got a great head start. Having three rental properties at 27 years old is a pretty good accomplishment. ROI is the amount you get back divided by the amount you have invested. So to increase that number, you need to increase the amount you get back, or decrease the amount you have invested. If you can't raise rents, look at pulling some equity out of the properties and use that money for investing. This will decrease the amount of money you have invested in the property, thus increasing your ROI. I would also make an effort to find time. Great deals will usually not knock on your door. You need to take the time to go hunting for them. Time is the most precious resource we have, so spend it wisely.

ishaha said...

Hi shaun,
thanks for ur feedback. I understand u cannot advice tailored to me. But, from experience point of view, what will u recommend. I know the market some but have not idea on short sale or foreclosure. Can u provide me with some info and also if i buy foreclosure (the list is published by county in mid june), can i outsource the work to some contractor and still be in good shape. plz let me know thanks again

Shaun said...

I have little information about short sales. I've never done one. I don't know what kind of foreclosure list you are talking about. Typically, the county has a daily listing. Once a month is too infrequent.

I suggest reading the discussion forums on www.richdad.com. Use the search function and look for "foreclosure" and "short sale." You'll find lots of information there.

Brian said...

Did you include your tax consequences in this calculation?

Shaun said...

No. Taxes are different for each person and each individual. Furthermore, they can change during the year. For example, when I sold this, I may not have had any offsetting losses, so I would have to calculate tax on the whole profit. However, if later in the year I sold some property at a loss, that loss could offset my profit here, reducing the tax bill. Therefore, I do not include taxes when making ROI calculations. This seems to be the standard way of doing it as I don't think I have ever seen anyone include tax numbers in an ROI calcualtion. (That is, tax numbers based on the profit made when selling. Yearly property taxes are always included.)

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