Return on Investment (RoI) in Real Estate
Thursday Sep 14th, 2017
Why does the return on investment in real estate vary from one individual to another? Even when the amount of investment is the same? First, let me start by giving you a clear definition of ROI (Return on Investment).
ROI is calculated as a percentage, and that percentage expresses the company’s or the individual’s profitability and it measures the efficiency of an investment. ROI formula is (Net profit / Cost of Investment) x 100.
Looking at the above formula, everyone would agree that a high net profit and a low cost of investment would be ideal figures for a higher ROI. So how can anyone achieve that?
The short answer is: knowledge!
ROI in real estate could be achieved in many ways. But first, they all entail acquiring a tangible property, which is no easy task. The condition and state of the property and what you do with it later on, whether you want to sell or rent it, determine the percentage of your return on investment.
The property could be just a piece of land, or a land with a house on it, or a land with an office building, or a land with a warehouse or an apartment. It could be anything, and how you choose to refurbish it or even put it up for sale or rent can be the deciding factors here.
Investing in real estate is unlike many other investment methods. The fact that you have a tangible equity that you can personally be involved in has its own psychological assurances that aren’t present in other types of investments such as stocks for example. A person is in more control of the outcome of the real estate investment when proper calculated steps are taken with the help of a knowledgeable broker.
A knowledgeable broker will:
- Accurately calculate the right amount of investment that suits your financial status and needs.
- Find the right property areas that fit your budget and investment aspirations.
- Find the right land, property, offices or any type of property that match your exact requirements and vision.
- Seek city approvals and all necessary paperwork.
- Renovate, restore, and renew all necessary aspects of a property.
- Tweak and adjust the plan along the way.
In conclusion, I can confidently state that the difference between a higher ROI and a lower one in real estate is equivalent to the difference between hiring a knowledgeable broker and an entry level one. Always go for knowledge as it will definitely give you value for money!