Need help with ROI calculation

[John Michael]

Hi I'm trying to determine if properties in NYC are worth investing in based on total ROI and not sure if my calculations are correct. If a property doesn't cash flow because housing is too expensive relative to rents and I have to come out of pocket let's say either $2.5k or $18k a year (based on putting down either 3.5% or 20% down) does that amount I put into the house year after year affect the total ROI calculation? I'm looking at the long term appreciation being the main reason for investing here but feel that the point of continuously putting money into the house diminishes the returns. When calculating long term total ROI when selling a property 30 years from now, would the "subsidizing" or money I keep putting into the house count or increase my "cash invested" in the ROI calculation? Total ROI=(net proceeds from sale - cash invested)/cash invested Example: House: 725k Upfront: 3.5% down + closing + PMI (60k) Cash Flow: -18k/Yr Total Yearly Out Pocket: -540k Sale: 1.3mm (2% annual growth over 30 yrs) Net Proceeds: 1.2mm Cash Invested: 700k = 600k (60+540k) + 100k (cushion) ROI = (1.2mm - 700k)/700k = 71% Annualized ROI = <2.5% With that annual return couldn't I try to invest in the stock market and achieve an annualized 2% return. With 20% down (below) the return looks much better. House: 725k Upfront: 20% + closing (170k) Cash Flow: -2.5k/Yr Total Yearly Out Pocket: -75k Sale: 1.3mm (2% annual growth over 30 yrs) Net Proceeds: 1.2mm Cash Invested: 345k = 245k (170k+75k) + 100k (cushion) ROI = (1.2mm - 345k)/345k = 247% Annualized ROI = 8% Now that sounds like a better annualized return, it's just hard for me to outlay that much money to invest when I'm also trying to get married soon.