The 6 Ways A Real Estate Investment Generates Profit

[Shafi Noss]

Sometimes it can be difficult to keep track of exactly how much you've actually made on your investment. I believe investment profits break down into exactly 6 components, so I wanted to put it out on the forums and see what people think and if it could be helpful. 

The 6 Ways A Real Estate Investment Generates Profit

1. Buying Below Market Value (Equity)

2. Loan Amortization (Equity)

3. Free Cashflow (Liquidity)

4. Value Add (Equity)

5. Tax Benefits (Equity or Liquidity)

6. Appreciation (Equity)

*Must Subtract Transaction Costs like agent fees, loan fees, title fees, escrows, etc. (Equity)

Together these components are mutually exclusive and collectively exhaustive for calculating profit. Even if none of the items are surprising, the framework might be useful for providing clarity. What do you guys think, trivial, useful? Is this picture missing anything?