ROI 101

by cherine khouzam, agent, cb riveras, 

Ever heard the term ROI?  For example:  “Make sure your ROI is protected”, or “ensure a profitable ROI” and of course “the highest ROI guaranteed! “ 

​Well for starters this is the best definition I could find for this term:

​Return on Investment (ROI)
​Definition: A profitability measure that evaluates the performance of a business by dividing net profit by net worth.

​In plain English: How much money will I make by spending the investment then exploiting (developing) it 

Sound complicated?
​Not at all, here is the usual formula used in real estate ROI Gain from Investement ÷ Cost of InvestmentFor example: You purchase a property for $300,000 USD  in Los Cabos with the intention of renting it weekly /short term (note there are approx. 12 “prime weeks” in the general resort rental market  but the reality is that Los Cabos benefits of a minimum of 34 weeks of high season weeks!) 

​Add all your investment related yearly expense (such as property taxes, home owner dues, property management and rental fees and other fees) and subtract them from the potential income; your net or ROI should look something like this:

25,760 rental income (average 23 weeks or $160/night, I rather be conservative…)   
300 property taxes (very realistic and quasi negligeable)
3,000 HOA ($250/mth on average)4,000 property management and rental fees (may vary)
1,000 other fees (insurance, gardnerer, pool maintenance, etc)                                                              
$17,460  Net per Year ÷ $300,000 = 0.0582 or 5.82%

​This means that you will receive a 5.8 percent return on your investment each year from your real estate purchase in Los Cabos PLUS the benefits of usage whenever you want.  And, a typical ROI on rental investments may be in the 4-8% range.

​Of course, this is a small example of how to structure your investment in Los Cabos so it can make babies for your wallet and, many variables are to be considered but in general, this should spring your ideas into action!

And throughout the entire process, know that we at Coldwell Banker Riveras are in the best position to assist you in this potentially very fruitful process. 

Questions or comments? Send them directly to me at Cherinek@cbriveras.com

​Cherine KhouzamTeam Leader – RealtorColdwell Banker Riveraswww.cbriveras.com