How to Calculate Return on Equity for Del Mar Homes Investments in the First Year

Many Del Mar homes investors use leverage in their purchases to decide whether the home they are prospecting is a viable and profitable one.  You can determine the expected Return on Equity for the home's first year using the formula below.

Determine the Cash Flow After Taxes. We'll use a CFAT of $17,000 as an example.

Then calculate the cash needed to invest as a down payment or for renovations - any up-front cash needed to get the property occupied.  We'll use $220,000 in this example.

Divide the CFAT by the cash invested:

$17,000 / $220,000 = .077 or 7.7% Return on Equity

You only need a calculator and a few minutes of your time to determine the return on equity for any property that you are considering purchasing. Choose a bottom line ROE and only invest in properties that meet those criteria.  This will assure your success as a real estate investor.  This method will be successful in any market condition.