Other People's Money - OPM
Real estate investors look for the return on
investment when evaluating a potential deal. Here is how the ROI is
calculated.
Real Estate Investors like to use Other
People's Money (OPM) in order to get into a deal. OPM can be money
from private lenders, hard money lenders, or a bank loan.
The goal is to get into a profitable deal with
as little of your own money as possible and to maximize the return
on investment of your own out of pocket money.
A Buy, Rehab, and Resell Investment
Example
Here is a real example of a deal an investor
was in for 3 months in Ball Ground, Georgia. The numbers are typical
of the deals beginning investors are getting into in the North Metro
Atlanta area.
The investor bought a house with $13,520 of
his own money toward down payment and closing costs. The rest of the
money needed to fund the deal came from a bank loan. The investor
made some minor repairs to the property, rented it out to a lease
purchase buyer and sold it after owning it for only 3 months.
His additional expenses during his holding
period totaled $1,246 so his total out of pocket expense were
$14,496.
At the resale of the house, the investor paid
back the bank loan, paid a commission to the real estate agents
received all his money back PLUS an additional $3,701 which was his
profit.
How to Calculate Return
On Investment
The ROI in the above example is
calculated by dividing the amount of profit ($3,701) by investors
out of pocket money ($14,766):
$3,701 / $14,766 = 0.25 = 25% ROI
The annualized return on
investment is 100% (25% divided by 3 months x 12 months).
This is a Great Deal!
The above example is a great deal
and is typical of the returns beginning real estate investors are
getting on their money in North Metro Atlanta. Often deals can be
found where the ROI is much greater.
Get Started Investing
in Atlanta Real Estate Today
Is your money sitting in a bank
account getting little interest?
Do you want to get started
investing in real estate?
Contact me today to begin the
conversation of how you can get started investing in real estate for
a good Return On Investment.
The funds needed to get started
are about $10,000 for a small deal like the one described above.
And of course there are plenty of
opportunities to get a great ROI on larger amounts of money secured
by real estate investments.
My cell phone number is
703-371-9548. Feel free to call or text me to begin the real estate
investing conversation. |
