What is the Average ROI and a REI property?
Forget the ROI, cap rate, IRR, or any other voodoo. If you want to succeed in this business, you need cash flow and equity.
I bought a house last year and paid $99k for it put $6k in it. So I got it for $110,000. The house is now worth $150k. I made $40k on that house, but I borrowed $110,000 so my ROI is $50k divided by my investment which is $0 so my return is infinite.
Come to think of it all my houses have all the money borrowed, so my average return on my investment is infinite.
That’s kind of a broad question, here are a couple of my examples
I have had returns where I spent $26,000 and sold for $62,000 after all expenses I cleared around $30,000 so my cash on cash return was over 100%.
I have put a home under contract for $52,000 and sold the home prior to closing for $62,000 and then closed using a back to back closing. In this deal I had no money and cleared around $11,000. since I invested no money, then my cash on cash return is infinity, because I took nothing and made something. Even if I had only made $1 my cash on cash return would be infinity.
The least I have ever made on a deal was $7,000.
I have had some of my clients make $150,000 on a single wholesale deal.
Having said that I don’t think their is really an average.
It’s a good question but a bit broad. Cashflow and equity is certainly the name of the game bit it’s good be able to messure them. You can cashflow and gain equity all day but if it’s not decent ROI, you should be looking to position yourself in another vehicle.
Like I said, it’s a very broad question but in the Commerical world I can tell you that Institutional Investors and Equity players target these returns depending on the strategy implemented:
Core/Core plus assets: 10-15% IRR
Value Added assets: 15 - 20% IRR
Opportunistic assets: 20% plus IRR
I agree on the cash flow and equity. Don’t be silly and buy a home and have negative cash flow or break even. That is when you speculate and you can afford to. Most people that I know that are RE Investors don’t care what the ROI is provided that the cash flow is decent and there has been appreciation historically and the future looks good.