How Do You Spell ROI?

Let’s reverse roles and pretend you are the possible client. You’re looking at this great investment. There are several places you can park your money for a decent return. Which investment gives you the best bang for your buck? There are a lot of investment opportunities obtainable. What is so special about this investment? This is why your product and your service must be alluring and powerful. This is why you need to be educating your clients about the “three R O I amigos”. They’re simple, straightforward and shoot from the hip.

Let the three amigos of real estate investing do the talking:

1. Cash-on-Cash

2. rule Reduction

3. Appreciation

I save the “7 Profits Centers of Real Estate” for my formal presentations and use the three amigos in casual conversations. Investors simply want to know their bottom line Return On Investment. End of story. My role as educator is to provide clarity and add value to my investor’s portfolio.

Amigo One: The merits of Cash-on-Cash was discussed in “What kind of Cash Flow are you dealing with?” This must be positive net cash flow as the opposite is unappealing to investors. Unfortunately, most retail investors place their money in negative cash flow investments. This becomes an opportunity to explain how and why real estate is such an attractive investment means. Cash-on-Cash … ROI #1.

Amigo Two: rule reduction is also known as mortgage buydown. This is one of the most commonly overlooked profit centers. Tenants are making the mortgage payments every month. Mortgage payments include interest and rule. The double assistance here is that the interest payments are tax deductible and the rule portion is being paid down by other people’s money. The Return On Investment on the rule reduction portion is a conservative 3% on the low end and as high as 6% depending on the prevailing interest rate and the term of the loan. rule Reduction … ROI #2.

Amigo Three: Have you noticed that the value of real estate tends to go up over time? How much did your parents buy their house for, oh, twenty years ago? Ten years ago? Five years ago? The difference in value is staggering. On a national extent, appreciation averages 3% per year. This method that certain areas in the country are experiencing negative appreciation where the value of character has decreased over time and other areas in the country are experiencing higher than average appreciation. The meaningful is to invest in the geographical areas experiencing maximum appreciation. For purposes of calculating an actual dollar figure for my Return On Investment, I use the most conservative rate of 3% appreciation per year with a footnote describing the appreciation rate for the past 2 to 3 years in that particular area. Appreciation … ROI #3.

Tally-Ho! Now simply tally up the three amigos and you have a powerful bottom line not to mention the other 4 profit centers. Use your casual conversations to book a formal presentation. This takes the emotion out of real estate. A confused mind always says no. Clarity brings the yes. Now that’s how I spell R O I.

Leave a Reply