How To Calculate ROI - YouTube

I'm surprised at how many people will not get in the game a real estate and do

a deal because they're afraid of the math. But I'm telling you a fifth grader

is equipped with all the math you need to successfully calculate real estate.

And at the end of the day, whether I buy a house or not really comes down to my

ability to crunch one number. ROI. What is my overall return going to be. In

this video, I'm going to do something I've never done before. I'm really going to break

down how you figure out the ROI. I'm going to make it stupid simple. You're going to

be able to get this. And then you're going to know when to pull the trigger and

when to run for the hills. Check it out.

For me, this is seriously one of the most exciting videos that I can make. For you,

many other people... There's sometimes a disconnect. Because I'm about to this

whole video is about really showing you a super stupid simple math equation. And

you know what? You're coming to me all the time and you're saying, "Is this a

good deal? How do I find a good deal? How will I know when I find a good deal?" I'm

like, "Well, there's just one little simple thing I do with a calculator to know." And

I'm going to share that with you today. The whole idea of being able to generate an

ROI is for you to know whether at the end of the day, the number is acceptable

or is not acceptable. If it's not acceptable, you're not making enough

money. If it is acceptable, your goal is to gather money from someone and put it

to work. Does that make sense? Listen, JB Shay, French economist said

that the secret to making more money in the secret to building wealth is just

taking low-yield money and turning into high-yield money .Like for example, how

many people are out there that have $100,000 sitting in a savings account

earning less than 1% interest? That's like the dumbest thing that you could do

with your money. Money is actually losing value at the rate of inflation which

about 3% a year. So, even though you're you're earning one percentage of

interest, you're really losing a net of 2% because it goes down 3% a year.

Instead it's like, "Wait a second, JB Shea." Move money from low yield to high yield.

Well if you can move money earning 1% to 25%, is that a game-changer? Yes, that's an

incredible game-changer. That's how you build wealth. But how do you know what

percent you're actually earning? ROI stands for return on investment. And if

you're watching this video and you're saying, "Okay, Kris. I like your videos

when you're entertaining. I like the motivational stuff. I like it

when I get excited. I like it when you show me the money. But you know what? The

moment you show me math, I have a belief that I'm not good at math and I shut

down." Don't do that. I'm showing you one simple equation. I know that you can

figure this out and I want you to understand ROI is the most important

mathematical figure in the entire game of real estate. I make all of my

decisions not on the color of the house, not the fancy Hill that it sits on, not

as potential. I make at the end of the day all of my decisions on one thing:

ROI --return on investment. Which means I'm going to put money out, how much money is

coming back? Now, before I show you the equation, just check out simple this is.

If I put out $10,000 and I'm earning 1% on my money, how much money now I'm

making? You need to know how to do that. So, how do you know what 1%... if I'm going to

make 1% a year on my $10,000 how much is that? Pull out a calculator and do this

with me. Put the number of 10,000 in. That's one zero. Zero, zero, zero. And

you're going to multiply it by 0.01%. So, in multiplying a percent, you got to

move it to the hundredths place. So, you don't multiply it by one. It's point O

one means 1%. And what do you get? 100 bucks. So, I put 10,000

out and at the end of the year I'm getting 100 back. Is

this a good investment or a bad investment?

!% is a horrible investment. But let's just say that we are getting back 10%

I put in $10,000 and multiply it by 0.1. That means 10 percent. And

what do I get? I'm going to get $1,000. 10% of a thousand is $1,000.

that is a better ROI. My goal is I always want to be double-digit. That's

my standard. Double-digit means I'm earning 15, 20, 25, 30, 35 percent on my

money. And you can't do that with 401Ks and IRAs and traditional lame investment

thingies. They're just not designed to do that. So, if that's the simple math, then

what's my ROI on a property? Well, I'm going to break it down to you really simple.

If I purchased a house... So, I'm going to take... I want you to watch what I'm going to do

here. We're going to take purchase price. So, what I bought the home for. And we're

going to subtract that from the sales price. So, if I bought a home for $100,000 and I

sold it for $150,000, what's the difference there

between 100,000 and when I sold it for 150? Check it out. It is

$50,000. But then I've got to subtract out all of my expenses.

I had realtor fees. I might have had closing costs. I had interest if I

borrowed the money. And so, I might be like, "Oh, I put in $10,000 of

carpet and paint. I borrowed that money and it cost me $1,000. So now,

I'm 10,000 and 1,000. Then I had to pay $10,000 in

closing costs." So, this deal has cost me $21,000. So, what's

left? In this math, 29 grand. In this fictitious example, I bought it for a

hundred, I sold it for 150. There was 50 grand left over. But I had 21,000

in total expenses. That leaves 50,000 minus 21,000

is 29,000. Guys, we're talking about math and subtraction.

You can do this. A fifth-grader can basically be a millionaire in real

estate if you understand this simple math. So, then I say, "Okay, I made

29,000. But what's my ROI?" It depends how much money you put out. Let's

just say for a moment that to secure this property,

you actually got someone to buy a cash. So, it was a total of let's call it even

your money. Let's say you put 100 grand out there. I'll show you 2

scenarios. And you're going to love what you're gonna see here. You're going to go

nuts on this. I hope you do. If you put $100,00 and you made

$29,000. And let's assume it took just one year to do this

entire transaction. Then here's my math. I'm going to take my $100,000

that I put out. On my calculator, I'm putting in $100,000.

And I'm going to divide it by the money that I made. Actually you have to do it

the other way around. It's funny I always kind of do it backwards for some reason.

And it tells me that 29,000 divided by a 100,000

0.29. And if I multiply that by 100, it'll tell me the percent which

is 29%. So, just to do the math again. If I take my profit... I'm going to

write it up really simple for you. Profit divided by your outlay, how much you had

to come up with? Is going to equal your ROI.

Now, in this case, I got 29%. Now, remember what I said,

is 29% a good ROI? Is it a double-digit? Yes. Is it a strong

double-digit? Guys, anything over 20% is a strong double-digit. So... But this gets

more exciting. This assumes that this is my annual ROI.

Now, let's assume that I did this deal in 6 months, not 12. Then I would actually

take the number of 29 and I would multiply it by 2. Because I did it in

half the time. So, 29 times 2, guess what? I actually annualized made a 58% return on

my money. Let's say that I actually did it in 90 days. So, I'm cutting it by a

factor of 4. I would take 29, I would multiply it by 4. And guess what that is?

That is 116% ROI. That is no longer a double-digit return.

It is a what? It is a triple digit return. Now, I've saved the best for last. What

I'm about to share with you is a little bit mind-blowing. If any of the math one

over your head, just rewind and watch it again. Repetition is the mother of all

learnings. So, just repeat, repeat. You can repeat this same video. Here's what I

want to share with you: What if you had a partner. And the partner gave you the

100 grand to do the deal. And let's say that your profit was your

$29,000. They put 100 out. You made 29 and

then you got to split this fifty-fifty. You made 14 1/2 thousand

dollars. They made 14 1/2 thousand dollars. Let's calculate their

ROI and let's calculate your ROI. Why am I doing this? Because I want you to know

you don't have to have money to succeed in real estate. You have to have access

to money. You don't have to possess the money. You have to have access to the

money. If you can get this, this is how you become a Multi-multi

multi-millionaire. So, please pay attention right here. Watch this. Their

ROI. Let's just say they put out 100

grand. And if this is you and this is them and they put up the money and you

did the work, then let's actually take a look at this. You're going to love this math.

They put 100 grand out they got $14,000 back. So, we're

going to take the $14,500. The profit. We're going to divide

it by what they put in. And that equals 14.5% return. But

we did it over 6 months. So, we need to double the number because it took half

of the time. So, if we do that, we get 29%. They made 29%

on their money in six months. Is this good? Now, they made 14.5%

of the money but they made 29% annualised. So, you

always look at it annualized. A professional is always going to ask that.

Are they happy? They will do more deals with you. They

earned a double-digit return. Trust me, they're going to do more. But now, let's

calculate your ROI. Uh-oh. You didn't put any money in. So, if you got 14 and

a half thousand dollars and divide it by putting no money in, there's only that

breaks the math. That you can't do that math. So, you know what your return is?

Your ROI... That's supposed to be an infinity symbol that goes on and on and

on forever. Can you see that? They made 29%, you made infinite. You put no

money out. So, then you say, "Well, Kris. That's amazing." But how do I calculate?

I'm like, "Okay, how much time did you put in?" Well, I put in 10 hours, okay? If you

know you've got an infinite return, then take your profit of 14.5

thousand dollars divide that by the 10 hours, you put in. And you'll see that you

made... If you do that math, it's going to show you that you made one thousand four

hundred and fifty dollars an hour. Have you ever had a job that pays you $1,450

an hour? I hope you're starting to understand why people love real

estate so much. Now, what is the take away? What should you be getting from this?

Here's the biggest idea that took me way too long to grasp. And I believe that you

grasp this right now. The singular biggest idea that I'm sharing with you

is that your goal is to learn how to take someone else's money earning a low

return and put it in a different opportunity earning a big return. And

then get a piece of the action. That is the biggest takeaway of this

video more than just calculating an ROI. Now, you need to know how to calculate

that ROI, you can do the math with me. But your next step... I want to show you how I

used somebody else's money to make myself 1.6 million dollars in a 4 and

a half year period of time. And it's coming up on this video over here. This

will show you how I became financially free at such a young age. And now you can

imagine the building that I'm in the real estate that I've done the hundreds

of homes that I'm buying this year, it's all a byproduct of mastering the math

and the information that I'm sharing with you right now.

This is the game-changer that you've been waiting for. So, do me a favor. Join

me on this next video. Watch exactly how I did it and then copycat me. Do the

exact same thing. And on that next video, I'll show you how to get a free copy of

my book, The Straight Path To Real Estate Wealth that literally weighs it all out.

Now, I give you the book for free I just ask that you cover the shipping because

I give this book away as long as I have it in stock. I'd give this book as many

people as I possibly can. Thank you so much for watching today's video. I hope

that it was meaningful and impactful for you. Some of the most powerful knowledge

that I can give you as a beginner investor to really understand how this

whole game works. If you liked it, it wouldn't mean the world to me if you

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My goal is real simple. I want to have 10 million subscribers. I want to help as

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you so much for watching this. Join me on this video right now. You're going to want

to watch it. It's going to show you how I did it and how you can do it too. Take

care of my friend.