Kevin AmolschWhen most real estate investors talk about returns, they mean one thing: money in versus money out. ROI. Cash-on-cash return. Cap rate. I get it. Those are the numbers that pay the bills, and they’re the returns every real estate investment spreadsheet is built around. But after two decades in this business, I’ve come to believe that the investors who have the most success and build the best lives are tracking a few other returns too. They may not always show up neatly on a spreadsheet, but they can have a major impact on your portfolio, your business, and your life.
So, let’s have some fun and walk through six types of returns every real estate investor should think about, starting with two you probably already know.
1. Return on Investment (ROI) in Real Estate
Return on investment, or ROI, is the classic. At its simplest, you take your profit, divide it by what you invested, and you have your ROI. But when calculating ROI on a real estate investment, there are a few pieces investors can overlook, including property appreciation, mortgage principal reduction, tax benefits, and monthly cash flow. Leaving these out can give you an incomplete picture of how your investment is actually performing.
What Should You Include When Calculating Real Estate ROI?
For example, I purchased my first house with 3.5% down. When I factored in 10% appreciation, monthly cash flow, and mortgage reduction, I generated a 333% return on the money I had invested. That’s not a trick. It’s just math, and it’s one of the primary reasons I got started in real estate investing in the first place.
2. Return on Equity (ROE) in Real Estate
Return on equity is the quieter return, and it can be a little trickier to understand. Instead of comparing your total return to your original investment, return on equity looks at the return you’re generating compared to the equity you currently have in the property. As your equity increases, your return on equity can actually decrease.
Why Real Estate Investors Should Track Return on Equity
I think ROE is especially useful when evaluating an existing real estate portfolio rather than a new acquisition. It can help identify properties that may be candidates to sell, refinance, or leverage differently. Of course, this gets more complicated when you have a low interest rate locked in. I’ve found myself attached to certain properties for exactly that reason.
But there’s another important consideration: you can’t buy something with equity sitting in a property, and you can’t directly reinvest that equity somewhere else. If you want to put it to work, you generally need to access it through a sale, refinance, line of credit, or additional financing. Tracking return on equity helps you answer an important question: Is the equity in this property working hard enough for me?
3. Return on Luck
Luck probably isn’t something you’ve seen on a real estate investing spreadsheet. I used to think of luck as completely random too, until I started noticing something. The people I know who seem to get “lucky” the most are often the same people making the most offers, attending the most events, taking the most meetings, and consistently putting themselves out there.
How Can Real Estate Investors Create More Opportunities?
Luck compounds just like money does, except the deposit isn’t cash. It’s action. You can’t control whether the perfect real estate deal or relationship shows up tomorrow, but you can control how often you put yourself in a position for something good to happen. If you want a better return on luck, increase your reps. Make more offers, take more meetings, and ask more questions.
You also have to recognize good luck when it shows up and be willing to capitalize on it. I was lucky when I met one of my closest friends. He started as a client, and we did some deals together. I recognized how important that relationship could be in my life, so I embraced it and put energy into it. Meeting him was luck. What I did with that opportunity wasn’t. We all get lucky at times. The key is recognizing it and doing something with it.
4. Return on Relationships
I’ve said it before: the people you surround yourself with are one of the biggest predictors of your success. Early in my career, I wanted to be part of a mastermind group. I couldn’t get invited into one, and I couldn’t afford to buy my way into one, so I built my own over breakfast. That group ended up changing the direction of my career.
Why Relationships Matter in Real Estate Investing
Your return on relationships isn’t measured by a single transaction. It’s measured over decades. It’s the call you get because someone thought of you first, the investment property you hear about before it hits the market, or the advice that saves you from making a mistake you otherwise would have had to pay full price to learn.
If you want to maximize this return, invest real time into a smaller group of people who challenge you, support you, and hold you accountable. A huge contact list isn’t nearly as valuable as strong relationships with the right people.
5. Return on Time
Time is an asset none of us can buy more of, which makes return on time one of the most valuable returns you can track. It’s also one of the easiest to ignore. Early in my career, I did almost everything myself because I thought it was the best way to keep costs down. In reality, it was costing me a fortune. I just didn’t realize it yet.
How to Improve Your Return on Time
Your return on time improves when you stop spending valuable hours on work that a system, AI tool, or someone else could handle for you. Before starting a routine task, ask yourself: Is this the highest and best use of my next hour? If the answer is no, the next question should be: Who or what could be doing this instead?
One strategy is to determine the value of your time based on your highest revenue-generating activities. Look at the 20% of what you do that produces the most revenue and calculate what that means in terms of an hourly rate. Once you understand the value of your time, it becomes much easier to decide what you should continue doing yourself and what you should outsource, delegate, or automate. Whenever possible, spend your time on the work that produces the greatest return or that you genuinely enjoy doing.
6. Return on Effort
When you finish a task, ask yourself: Did I make this easier for the next time? Most people complete a task and move on. They don’t put in the small amount of extra effort that could make that same task easier, faster, or cheaper the next time around. In doing this, you are creating a system that can pay you dividends and time in the future.
Build Real Estate Systems That Keep Paying You Back
At Pine Financial Group, we’ve spent the last few years building dashboards, workflow systems, and better processes. The return has shown up in ways a spreadsheet can’t fully capture. We make decisions faster, make fewer mistakes, and our team doesn’t have to reinvent the wheel every week.
I use the same thinking with my real estate investments. For example, if I have a residential rental property with a washer and dryer, I’ll either remove them or “give” them to the new tenant. That little bit of extra effort upfront can mean fewer maintenance requests and fewer repair costs down the road. Look at the tasks you repeat most often in your real estate business and find ways to build processes or systems around them. That’s return on effort.
The Best Real Estate Returns Aren’t Always Financial
Money in versus money out will always matter in real estate investing. ROI, cash flow, cap rate, and other financial metrics should absolutely be part of how you evaluate an investment, but they’re not the whole scoreboard.
The investors who win the long game understand how to stack multiple kinds of returns. Track your return on investment and pay attention to your return on equity, but don’t overlook your returns on luck, relationships, time, and effort. Those returns may be harder to fit into a spreadsheet, but over the course of your real estate investing career, they may move the needle more than you think.
Have a deal in mind? Contact Pine Financial Group today to talk with our team about financing your next investment.