We’ve all heard of ROR (Rate of Return) or ROI (Rate of Investment) but do you really understand how they apply to your real estate investments? Along with ROR/ROI let’s look at a couple of other formulas that help quantify good real estate investments.
Those of you who have taken the Professional Real Estate Class you know I emphasize CADS (Cash After Debit Service), and touch on CAP Rate (Capitalization Rate) as two formulas that you need to understand when buying rental property. There is also ROE (Return on Equity) for those investors that have held assets for a long time and want to know what kind of return their equity is getting.
I thought we’d take a little time to explore some of these formulas. Understanding how these formulas are calculated and what goes into them will help you better understand and analyze your investments.
ROR and ROI are the most commonly used formulas to analyze an investment. Investments from real estate, stocks, bonds, art apply ROR/ROI. ROR/ ROI are the ratio of money made (or lost) in relation to the investment made, also known as Capital. The… Continue Reading
