How do you look at your ROI?

[Mike Rodriguez]

Hi All! I wanted to know your opinions on how you view ROI.

For example, if I'm creating a website and it costs $8,000 for example. My thinking is that if I just sell $8000 of products on there, I'll recoup the cost of the website. However, shouldn't I be looking at the net profit from that sale not just the $8000?

Similarly in real estate, if I want to build a ADU in the back of my house and it costs $100,000 but rents for gross $24k a year, I'll recoup the cost of the build cost in 4 years. However, when making these decisions, how do we know upfront what the net rent is going to be after depreciation, taxes, expenses, etc to determine an accurate break even amount? I'm sure after calculating this it won't be 4 years?

Looking forward to everyone's insight on their thought process. 

[Cody Campbell]

@Mike Rodriguez There are many ways to look at ROI. It seems your are focusing on how fast you can get your initial investment back, and that could be what you focus on. I'm gonna let you know how I look at my return on investment.

I am a long term BRRRR, I go in and buy a home, rehab it, refi it, rent it and repeat. I am able to do this with no money down, or in it.

Purchase: 80k

Rehab: 30k

Carrying Cost: 10k

Appraisal: 150k

20% Equity for the bank: 30k

Cash out: 120k to me 

With the cash out I pay everything off and I have a house that will be paid by the tenant. My monthly cash flow is low but I have no money tied up

Heres another example:

I buy a house for 100k so I put 20% down or 20k. Each month the property cash flows, (after mortgage, taxes, insurance, cap ex is paid) I make 200 a month or 2,400/yr with my initial investment of 20k I am making 12% on my investment. 

You can't simply look at Gross income and say you'll be able to pay off your initial investment. Hope this helps.