How To Calculate Return on Money

[Joe Schaak]

I've heard some people who are flipping homes offering 20-25% return on money when looking for private money. How is that calculated? Are they figuring in points offered as well as the percentage rate on the loan? Thanks!

[Ben Stoodley]

I agree with @Jason Hirko on this. In my experience, the vast majority of my clients use our company to finance the majority of the deal (80% of purchase + 100% of rehab costs), then they bring in partners for the down payment (20% of purchase + closing and holding costs). This is for CA where the price points are very high, so even though they only have to come up with 20%+, it still equals $100k+ , which is a lot of money out of pocket for one person for one deal. So the advantage of JV deals, is that you wouldn't have to spend all $100k yourself, then you can use your personal capital to do this on multiple deals at once. Hope this helps @Joe Schaak