TIM THOMAS

4 Ways To Measure Return on Equity (ROE) and Avoid Housing Market Money Losses

Real estate investors love to brag about their cash flow or cash-on-cash returns, but for my money, I think Return on Equity is the most important real estate metric you should measure for your rental properties.

4 Ways To Measure Real Estate ROI

1. Cash Flow

You’ll hear lots of investors brag about how much cash flow they get from their properties. Unfortunately, cash flow by itself doesn’t tell you very much.

2. Cash-on-Cash Return (CoC)

Cash-on-cash is a pretty straightforward metric. It’s the amount of cashflow you make after expenses divided by how much you have invested in a property.

3. Internal Rate of Return (IRR)

IRR may be the single best way to compare different real estate projects to each other to see which one produces the best return.

4. Return on Equity (ROE)

Return on equity in real estate blends the simplicity of cash-on-cash returns with some of the benefits of longer term planning of IRR.

Real Estate Return on Equity

How do you calculate return on equity? Return on Equity (ROE) = Total Annualized Return / Equity So we need to know 2 things: 1. Equity 2. Total Annualized Return

What is Equity in Real Estate?

It’s the amount of cash you would put in your pocket if you sold your property today.

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