How do you guys calculate ROI?

[Alexander Churchill]

Hi BP

I’m a residential RE Investor from a small city in PA.

I’m currently 26 and started investing when I was 23

I currently own 2 rental properties (both doubles) plus the home we live in which we just closed on 2 months ago.

I was wondering how you guys calculated ROI? The way I do it for my properties was always a COC (cash on cash) version which was always my personal preference and I looked at it sort of like this

For example:

Property A: 25k + 7k to close (25% plus closing cost)

Property required 32k to close

Property A as an investment/business is now sitting at -32k and Produces 10k/y cash flow. After 40 months with occasional expenses and relatively consistent occupancy pays off its 32k in debt and is now sitting at 0. Now everything after that is considered profit on that investment/business.

In this process I more or less look at the mortgage loan not so much as “debt” even though technically it is. I look at it as a leverageable variant in other words as long as I don’t “overpay” for something or try to sell during a market crisis I can usually always count on that mortgage as being something that I’d always be able to at the very least pay off in a sale therefore not really considering it as “debt” but more a less just a floating variant.

What are you guy’s thoughts/opinions?