The REAL Wealth Formula Podcast

EP 31: How to Calculate ROI

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In this episode of the Real Wealth Formula, you’ll learn how to calculate ROI the right way. The discussion covers why ROI is often misunderstood, the difference between cap rate and cash-on-cash return, and why risk matters when comparing deals. You’ll also discover how to maximize ROI using leverage, human resources, and sweat equity. If you want to make smarter investment decisions and boost your returns, this episode is for you.

Key Takeaways
  • ROI is simple: annual return divided by your total investment.
  • Cap rate applies to properties owned free and clear.
    • Cash-on-cash return applies when leverage is involved.
  • ROI numbers on deals are guesses based on assumptions. Always review actual performance.
  • Risk must be factored in when comparing leveraged vs. non-leveraged returns.
  • Human resource ROI can be higher than real estate ROI if people generate more income than they cost.
  • Sweat equity should focus on unique, high-value skills like acquisitions, not basic labor.
  • Active ROI (wholesaling, business operations) and passive ROI (buy-and-hold real estate) cannot be compared directly. Both play roles in building wealth.
  • The Real Wealth Formula: Reduce expenses, Enlarge active income, Acquire passive income, Live on passive income.

    • Resources and Links Mentioned
    • REI School
    • Rebiz 
    • Real Wealth Formula Calculator
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          The REAL Wealth Formula PodcastBy Brad Hovis