how do i calculate return on investment for house repairs?

One Comment

1. Barry says:

   July 20, 2009 at 6:27 pm

   This is best shown by a simple example:

   Scenario:

   You buy the house for $150,000.00 with 15% down payment and the balance ( $127,500.00) financed at 6.75% fixed rate with interest only option.

   So far you initial outlay is $22,500 plus let’s say $1500.00 in other closing costs which adds up to $24000.00.

   Then you spend $20,000.00 on fixing the house and it takes six months to finish the job.

   During these six months, you have been paying more or less $750.00 a month and that is $4500.00

   You sell the house immediately for $190,000.00 (simple assumption)

   At the close of escrow (no prepayment penalty is a must) you will receive $190K – $127.5K – $1.5K (closing expenses) – $8.5 (reasonable commission) = $52.5K

   Your outlay ( investment) was $24K + 20K + $4.5k = $48.5

   in 6 months you made $52.5K – $48.4 = $4K

   now $4k / $48.5 = .0825 = 8.25% which represents an annual yield of 16.5%. ( not too bad!)

   This was a simplified example with a lot of assumptions but it should give you an idea as to how to calculate the return on investment.