ROI calculation help needed

[Ben C.]

Hello, I have a question about calculating ROI for a flip. Can you please let me know how closing costs factor into this calculation? What is the calculation you use to analyze the deals ROI? How does the calculation change if you are purchasing cash vs traditional financing? Lastly, what % return is your minimum on all cash transactions? Thank you!!

[Jacob Price]

Think of closing costs as an addition to the cost of the property. For example if you purchased a $100k home and closed for $5k you would think of the home as $105k. Of course closing costs can vary so it isn't quite as simple as a flat %. The ROI calculation changes between cash and traditional financing in a few ways. First purchasing with cash allows you to avoid the interest that comes with traditional financing, however your cash on cash return will not be as high seeing as you aren't using the banks leveraging ability (or any lender). I'm not sure how to answer your last question, but I hope some of what I said helps!