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## Understanding How to Calculate ROI in Real Estate

In every investment an investor puts money on, the essential thing is the return on investment of that particular project. Similarly, knowing the ROI is vital just as it is in other industries. There are some ways investors use to know the ROI. However, the surest way is through calculations.

What is ROI exactly?

Return on investment is the outcome one gets after investing in a project, and in this case, real estate. Precisely, it’s the ratio between the cost of investment and the profits. It’s determined as a percentage of the cost.

Importance of calculating ROI In Real Estate

There are many benefits of calculating ROI in real estate, especially to an active investor. Below are some;

Allows for Comparison

The critical thing potential investors do before putting their resources in a project is making comparisons to know the available opportunities. For instance, real estate is comprehensive. It entails housing and land. Therefore, comparing the options available in it and their potential return is essential.

The Project’s Outcome

Return on investment allows the investor to know how much assets the real estate will produce in terms of income. That allows for room for selection.

Here are the common steps to follow;

Understanding How to Calculate ROI in Real EstateCalculate the Yearly Expected ReturnsUnderstanding How to Calculate ROI in Real Estate

It’s important to estimate how much returns to get at the end of the year before calculating any other thing.

Eliminate the Expenses

Secondly, subtracting expenses incurred throughout the month is also an essential primary step.

Don’t Forget Equity

Calculate equity and add it to the flow column to determine the net income.

Find the ROI

Do that by dividing the result in the above step by the total investment made.

Below is the formula to use;

GAIN-COST

Calculating ROI in real estate using the above formula may require consideration of various variables such as expenses. However, it’s not as complicated as others may think. Furthermore, real estate investment is a perfect investment option that you can consider. Both housing and land are profitable as long as you track your investments sufficiently.

The above steps are recommended, especially where practical results are desired. The application of the formula in real estate will enable you to get accurate results.

## Exterior Home Improvements to Consider

Taking good care of a home’s exterior can make it stand out from all the other houses on the block. The exterior is the first thing people notice when they see a house, so it can instantly make or break people’s first impressions. These are some exterior home improvements anyone should consider.

Proper landscaping and yard maintenance

Cleaning up the yard will make any home look more appealing. No one wants to see clutter or a messy front yard when they see a home for the first time. Even taking the time to get rid of little things like dirt and leaves will make a difference. A neat yard can make any home’s exterior appear significantly more appealing. Hiring a landscaper is an option for people who do not have the time to do their own landscaping.

A fresh coat of paint

A nice coat of paint can make an old house look new again. If a house looks like it needs to be painted, people will notice, and this can make the house look less attractive. When people get their houses painted in popular or classic colors, their homes instantly seem more inviting and valuable.

Outdoor lighting

This bright detail can make a house look more welcoming. Outdoor lighting can be affordable or pricey, depending on the type, but it is worth the investment.

A wooden deck

A deck opens the door for countless possibilities, from outdoor family barbecues to summer cocktails with friends. A deck is always worth the investment and can easily make any home stand out. It is something that people search for when looking for new houses and could be the deciding factor that makes potential buyers choose one home over another home.

A garden

Gardens are known for being beautiful and whimsical and can instantly make any home appear more appealing. They add color to a home’s exterior, along with a newfound sense of fun and playfulness. Gardens will seem extra attractive to potential buyers with families, as kids will enjoy playing in the “secret garden” and couples can enjoy planting flowers together as a new hobby.

All these home improvements are worth the investment, as they can bring any home’s exterior to the next level.

## Important Factors to Pay Attention to Before Buying a Home

There can be little doubt that the purchase of a new home can be one of the most meaningful and exciting events in a person’s life. But there are certainly several steps that most potential homeowners will need to take before signing off on a big mortgage. Here are just four important considerations to make before purchasing a new house and why buyers must always beware in the housing market.

1. Where is the House Located?

In the current housing market, there can be little doubt that a house’s potential value over time will be in large part determined by its location. To illustrate this fact, simply consider that a vacant lot in Palo Alto, California recently went on the market for \$9 million. Indeed, the going wisdom in real estate circles for decades has been that the least impressive house in a good neighborhood is better than the most impressive house in a bad neighborhood.

1. Foundation Damage

If there is visible damage to a house’s construction, potential buyers may want to give a home purchase a miss. For example, cracked concrete or uneven and lopsided floors can both be signs that a house has suffered serious foundational damage over the course of its history.

Moreover, fixing these issues can be a major post-purchase investment that can add tens-of-thousands of dollars to a home’s “real” cost. If you don’t want to add to the already-sizable budget constraint of taking out a mortgage, in other words, it is important to be certain that there won’t be hidden repair costs to deal with once you’ve bought a new home.

1. Water Damage

In addition to foundational damage, it is very important for potential buyers to determine whether a house has sustained significant water damage. Issues related to water damage can severely affect both future repair costs on a home and the well-being of the house’s structure itself. To put it mildly, no one wants to be forced to move out of a house that they’ve just purchased! Before you finish your first inspection on a house, be sure to examine ceilings and floors for permanent stains or other signs of flooding.

1. Mold Issues

When given the chance to examine a house, potential buyers should definitely be on the lookout for issues related to the growth of mold. Red or black spots around sinks, toilets, tubs, or tiling can be signs that a house is suffering from serious mold issues; indeed, dealing with these problems can be expensive and time-consuming. More importantly, issues related to mold can also affect the health of you and your family.

While it may be tempting to sign off on a house that seems like a dream home, savvy homebuyers should always take a critical approach to invest in real estate. Adding huge repair costs to a mortgage can often strain a person’s financial resources to the limit. Certainly, that’s no way to start a new chapter in your life.

## How to Find the Right Real Estate Agent for You

It seems like everyone and her brother is a real estate agent these days. It’s relatively easy to become licensed for the work, but it’s a lot tougher to get the experience, knowledge, and skills needed to help your clients thrive.

Which is why it’s so important to find the right real estate agent for your situation. Here are a few important points to consider.

Licensing

At the bare minimum, a real estate agent has to be licensed to sell in the state in which you’re buying/selling. (If they’re not, the person claiming to be an agent won’t even be able to help you, so why bother paying their commission?) After that, there are a few more licenses to look out for. Once this crucial threshold is met, consider looking for a professional who is a Realtor, rather than just an agent. Realtors with a capital “R” are members of the National Association of Realtors, a group that requires strict adherence to a code of ethics - and that’s something you want on your side.

Locale

Real estate markets vary from city to city - and sometimes even neighborhood to neighborhood. Make sure your Realtor knows what’s going on in the areas in which you are looking to buy/sell.

Experience

There are a million tiny little things that can go wrong during a real estate transaction, and really the only way to know what signs to look for is from experience. Make sure your Realtor has had experience both buying and selling and specifically in the type of property you are looking for. There are differences, for example having to do with available financing and rental potential for first-time buyers vs. experienced buyers, as well as for condos vs. single-family homes.

Fit

Is your Realtor available when you need her or him to be? Markets move fast, so an agent who’s there for you one day and ghosts you the next is a bad sign. Also, just having a genuine, authentic rapport with the person guiding you in the real estate process will go a long way towards having a genuine, authentic experience.

While shopping for a Realtor is an important first step in shopping for a property, it can be the most important part of the journey. And all of these factors aside, the right fit always comes down to feeling comfortable with and available to the real estate agent that will be taking you on this exciting journey.

## What You Should Know About Real Estate Finance

Real estate finance generally involves how an investor chooses to secure funds for an impending investment. The investment may vary from purchasing a home, a piece of land, or renovations.

Unlike other financings, real estate comes with underwriting and may sometimes be overwhelming for new investors. However, one should know a few things before making a significant decision on investing that can be of great help.

How to get Real Estate Financing

For investors, the first and foremost step is identifying the property, negotiating the prices, and any other requirement one may have. This step will help in determining which option in real estate financing will complement one’s strategy. The methods of financing real estate investment are often many, but knowing which one suits your investment best is the trick.

With a little bit of due diligence on the part of the investor, there should be no fear or anxiety about finding financing. Some of these financing methods are:

• Hard Money Lenders
• Private Money Lending Institution
• Self Directed IRA Accounts
• Seller Financing
• Peer-To-Peer Lending
• Cash Financing

Alternatively, when deciding the best form to finance a real estate project, one should also consider available mortgage loans provided by the government, traditional private lending institutions, or leveraging personal equity.

Loan Finance for Real Estate Investing

• 203K Loan: Loans supported by the Federal Housing Administration and supports the purchase of older properties for rehabilitation purposes.
• Home Equity Loan: investors who have built equity for their property can access loans, allowing them to use this equity as collateral for the loan.
• FHA Loan: for investors without a perfect credit score or have no access to large capital to satisfy down payments can opt for a mortgage- supported by the Federal Housing Administration.
• Traditional Mortgage Loan: this is a conventional home loan financed by banks.
• Conforming Loan: This is a mortgage loan that complies with the Federal Housing Finance Agency’s rules and limits.
• Portfolio Loan: these are loans serviced by the first lenders that first issue the funds as an alternative to selling the loan to the secondary loan market.
• VA Loan: these are mortgage loans meant for veterans through a program by the United States Department of Veterans Affairs.