Total ROI Investment Spreadsheet

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Total ROI Investment Spreadsheet

Lee G.
Accountant · Lumberton, NC · Member since 2015 · 58 posts · 22 votes

I recently downloaded rental analysis spreadsheet which does a good job of mapping out a year-by-year ROI based on several assumptions. that you must enter. I inserted real-life investment I purchased and currently own, which in hindsight, I probably wouldn't make again, but the learning along the way would justify the purchase in my mind.

On that investment purchase, my ROI in year 1 was calculated at 6.12% per J Scott's spreadsheet (not great!). However by the 5th year, the spreadsheet is showing a 7.5% ROI and by the 10th year, a 10.19% ROI.

How would you grade this investment? 7.5-10% ROI in my book isn't bad (and this is factoring in PM which I also currently handle myself). How would you evaluate or grade an investment that takes several years for the investment to really get going from an ROI standpoint? Is it simply, you would prefer to buy better, but now that you own it and it will return 7.5-10%, it's more of a keeper?

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  • Ben Wilkins
    Rental Property Investor · York, PA · Member since 2017 · 377 posts · 315 votes
    9y

    @Lee G. - it really depends on your strategy. Making an investment based on future maybe's isn't for everyone, while some investors base their strategy on this.

    I would pass on a 6% ROI turnkey rental simply because it is below my strategy's target ROI. I invest in properties that are over 8%, and do not dip below that.

    I would invest in this property if I had a planned value-add opportunity for the property and knew that I could get the ROI up within the first year.

    Now, if I changed my strategy to "I want to invest in rental properties that start above 5% ROI and will grow to 10%ROI within ten years", then this property would fit my profile and I would consider purchasing.

    Again, it all depends on what you're looking for, what your strategy is, and what your baseline values are.

    Since you already own the property and it is giving a 6% ROI, start looking at how to improve the property's value by increasing income or decreasing expenses. If you can do that, then the property will look much better in your portfolio.

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  • Lee G.
    OP
    Accountant · Lumberton, NC · Member since 2015 · 58 posts · 22 votes
    9y
    Originally posted by @Ben Wilkins:

    @Lee G. - it really depends on your strategy. Making an investment based on future maybe's isn't for everyone, while some investors base their strategy on this.

    I would pass on a 6% ROI turnkey rental simply because it is below my strategy's target ROI. I invest in properties that are over 8%, and do not dip below that.

    I would invest in this property if I had a planned value-add opportunity for the property and knew that I could get the ROI up within the first year.

    Now, if I changed my strategy to "I want to invest in rental properties that start above 5% ROI and will grow to 10%ROI within ten years", then this property would fit my profile and I would consider purchasing.

    Again, it all depends on what you're looking for, what your strategy is, and what your baseline values are.

    Since you already own the property and it is giving a 6% ROI, start looking at how to improve the property's value by increasing income or decreasing expenses. If you can do that, then the property will look much better in your portfolio.

    Ben, I think it speaks to the amaxong power of using leverage. The equity buildup as a result of payoffing off the loan is the main factor increasing Total ROI each year. I have used spreadsheets in the past but to see the increase in ROI of even an average investment is eye opening.

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