***UPDATE: We have noticed that there is a mistake in the math when Kevin annualizes the gross amount on the COC formula (approx. 2:20). This amount should actually read $4,200, which does lower the return to 9.3% when calculating that amount into the COC formula. The ROI would adjust to 33.5%. We apologize for this mistake and believe the video accurately illustrates the difference between the cash on cash return and the return on investments.
Real estate investors find and purchase the properties they do for one reason, an investment! Whether this investment is a short term investment, where they may buy, fix, and flip the property within a year, or it is a long term investment, where they buy and hold the property as a rental. The decision as to what type of investment (fix and flip vs. fix and hold) the investor may make, may be determined by the profit within the deal and how much of a return an investor could make over time by keeping the property as a rental. To calculate this return, the investor may want to run through two different formulas to analyze the investment, these being the cash on cash return and return on investment. Kevin explains the difference between cash on cash return and a return on investment, and runs through an example scenario to help you understand the different profits that can be calculated through each.
Have questions on either one of these formulas or would like to run through a scenario before you purchase your next investment property? Reach out to us at any time, we are happy to help run through your numbers and help you decide as to whether you are investing in a good deal or not. You can reach us through email, phone, or even our Facebook page – http://www.facebook.com/pinefinancial.
Need to get financing for your next investment property and don’t want the hassle of going through a traditional bank? We can help there too! Check out our website at http://www.pinefinancialgroup.com to find our different loan products and how they can help you purchase your next investment property.