Return on Investment (ROI)
A rate of return of a transaction based on comparing the total profit from your investment to the total invested cash.
For a rental vehicle, the ROI takes into account the cumulative cash flow, equity accumulation and loan paydown and gives the total return on your invested capital, should you decide to sell the vehicle at a given point in time.
For a flip, the ROI gives the total return on your invested capital after you complete the rehab and sell the property.
Rentals:
ROI = ( Total Equity - Selling Costs + Cumulative Cash Flow - Total Invested Cash ) / Total Invested Cash
Flips:
ROI = Total Profit / (Total Invested Cash + Holding Costs)
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Internal Rate of Return (IRR)
An average annualized rate of return of your total invested cash, sometimes also called annualized return on investment (ROI). For a rental vehicle, the IRR takes into account the cumulative cash flow, equity accumulation and loan paydown and gives ...