Real Estate ROI and the Infinite Return Secret

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What is the average return on your real estate investment?

This is a really good question, and I got it recently, and there's two ways for me to look at it.

The first one is, what can I expect from real estate if I invest in it?

And the other way to take it is, how do I actually calculate my ROI?

So today, you get a boom double bonus, and we're going to do both of those.

Let's answer the first question.

I mean, what kind of return can you expect from real estate?

Usually the Pearson asking that question has money in the stock market, 401k, and IRA,

and I have to tell you that it comes down to the operator more than the property.

Because some operators know how to produce five or six or seven percent in real estate,

and from that perspective, it looks like the stock market.

But some of us know how to produce 25 or 30 percent.

I know how to, in time, produce 50 percent, 100 percent, and 200 percent, and 1,000 percent,

and 10,000 percent.

Now I lost all my credibility because you're like, whatever,

jokes, or I'm leaving, but hang tight for a second.

So I've done 4,000 projects.

My name is Chris Crone, for those of you that don't know.

Let me just tell you that when I started doing real estate, I was doing 20, 30 percent.

But then I learned how to tap into real estate with much higher ROIs.

As far as the actual dollar itself goes, like investing.

If I, let's say I'm buying 150,000 dollar house, and it's a 20 percent down payment.

So let's say I put 30,000 dollars into the property.

That's what 20 percent is.

If I'm a typical person doing backyard real estate, honestly,

6, 7, 8 percent is very, very normal.

I teach a strategy for the backyard called lease options,

or for those that want to be hands off,

I take them into the best markets nationwide for high ROI rentals.

And in both of those strategies, I can usually pound out a solid average 25 percent,

which means that I'm doubling my money every four years.

From that point of view, that's why I love real estate.

That's why I have a hard time putting my money in anything else.

I love putting it in alternative investments,

but usually not in the stock market for one K IRA.

It's just not my deal, even though that's what's taught,

normal, standard, and accepted.

Let's talk about, however, how you actually calculate your ROI.

Let's go back to that example.

I have a house that has a value of 150,000.

If I'm putting a standard 20 percent down,

then that means that's roughly 30 grand.

So whether I get my 30 grand out of my 401K IRA,

stock market, home equity from my primary residence, or whatever,

I'm going to take that 30 grand.

And if I put it into a property,

I got a nice simple equation here.

Calculating ROI is the most important calculation

that you need to know how to do.

So I'm going to put my calculator.

I'm going to do it with you right now.

We're going to assume in this example that I put 30 grand in.

And let's just say that I got 30 grand back out.

So I doubled my money.

What we're going to do is we're going to take my profit,

which if I double my money, we know that we made $30,000.

And then it says over here, we need to divide that by the money that we put in.

In this case, it also just happens to be $30,000.

And you'd expect that.

30,000 divided by itself is one.

But now the equation says over here,

we need to multiply that by 100 to figure out the percent.

So times 100.

And we made 100 percent on our money.

But the deal took five years.

So I need to divide it by the number of years, which is five,

made 20 percent on my money on that deal.

Let's do it when we're talking a little different.

Same deal.

I found a home for 150,000.

I put 20 percent down 30 grand.

Maybe it came from my 401k IRA and uncle and niece of something.

Let's see on this one, we made $50,000.

So now I'm going to take 50,000.

Then I'm going to divide it by my investment.

And I get 1.666667.

Then I'm going to multiply that by 100.

And it says low and behold.

I made 166 percent return on my money.

But it took me six years to do it.

So I'm going to divide that by six.

And my ROI is 27.7%.

Just between you and me in the wall.

If I'm not doing 25 percent,

I kind of feel a little bit let down.

Two things that I think are actually fairly mind blowing.

Here's the first one.

What happens if you sold this house and you made 30 grand,

and then you put it into two properties.

So I did this deal with 150.

Put 30 grand in, five years later sold it, made my 20 percent ROI.

But now I take my 30 grand of my original down payment,

and my 30,000 a profit, and I put them both here.

Basically, I took one home and turned them into two,

but on the same original dollar.

On the original dollar, if I was earning 20 percent before,

and if I'm going to earn the same ROI,

I'm now going to make 40 percent on my money.

Why?

Because I doubled, and now I'm going to double it again.

And this is how you can get up to 100 percent.

I've been doing this for 15 years.

So on some of my investments, I'm now earning hundreds of percent.

But then I'm going to show you one final bonus.

If you use OPM, have a partner that says,

Chris, you've got an awesome track record.

Let me put up the money, and you do all the hardware.

You do that, you lifting, you find the deal,

sick your team on it, make it happen.

I'll put up the money.

We call that OPM, other people's money.

If you put no money in, and you buy five homes with this partner,

and you make 300,000 a profit,

they get 150,000, and you get 150,000,

how do you calculate your ROI on getting 150,000,

but putting no money in?

Well, technically, it's an infinite ROI.

So then the only thing that you can do to really calculate it is then to say,

well, let's look at how many hours I put in,

and then you can start calculating what your time is really worth.

That's it for today's episode of Habit All.

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