Why do I love calculating ROE so much? Is it the cash flow? Is it the fun of finding the net income? Or the net profit!? Ok, so I hope you can here the – just a dash – of sarcasm in my voice.
I found it much easier just to make a return on equity formula once, put it in a spreadsheet, and use it to help analyze an equity investment. I prefer this method now for any real estate investing activity. You’ll want to be able to quickly find the shareholders equity on any investment property or other commercial real estate investments.
Please, go ahead and try my free real estate equity calculator. You’ll want to track your positive cash flow to help find your real estate company’s net income. When it comes to calculating your return on equity, make sure you’re also keeping a close eye on your net assets, debt service coverage ratio, and net profit margin. This will help you know that your investments are performing as expected.
Real Estate Return on Equity (ROE) Calculator
Return on Equity (ROE) Calculator
Disclaimer – This is for informational purposes only. Please do not use this as a substitute for official financial advice.
Download Our Free Return on Equity Formula Spreadsheet
Excel | Google Sheets
You can calculate your ROE on this spreadsheet too. Go ahead and download it so you have it locally. It’s for informational purposes only and should not be considered financial advice. So please, make sure you connect with a financial expert for good measure.
Why Real Estate Investors Calculate Return on Equity
Real estate investors like to calculate so they can use return on equity (ROE) for real estate investing. This is because it’s one of the best ways to measure how efficiently their equity is being used to generate profit. It can work if you are managing a rental property, or if you are considering equity financing. ROE calculations help real estate investors have an idea of how much profit they’ll make for every dollar invested. This is a pretty common practice for any smart investment strategy. This is doubly true for if you’re deciding whether to reinvest, take on more debt, or use a home equity line of credit to fund future growth.
An Ongoing Learning Process
ROE also helps real estate investors evaluate their company’s ability to manage debt payments and balance debt financing with equity. For example, if you’re dealing with negative cash flow or even negative net income, calculating ROE can reveal whether your total shareholders’ equity is being used properly. This can help the decision making process for if any adjustments are needed to improve net earnings. You’ll want to continue racking metrics like annual net income, average equity, and the company’s assets minus liabilities. Overtime, this help enable you to make informed decisions about your portfolio.
Check Back for Updates to this ROE Calculator for Real Estate Investing
Why should real estate investors check back for updates? I hope you will find that this ROE calculator is your secret weapon for smarter investing. I’ll want to improve it to help analyze your annual cash flow, calculating return on equity more granularly. This can also help you figure out how a down payment impacts your equity capital, this tool has you covered. My overall goal is to make it perfect for tracking average shareholders’ equity, reviewing your income statement, and even planning a cash-out refinance to fund the next big real estate investment.
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I try to work on new free resources that I learn from all the knowledge I’ve acquired and real estate textbooks I own. I based all of these best practices on research. If you’d like to be the first to know when I drop something new (like updates to this ROE calculator or other tools for real estate investors), just add your email. I’ll send everything straight to your inbox, so you never miss out. Let’s keep building your investing toolkit together.
About the Author
Joseph E. Stephenson, REALTOR®
License #00054082 | Kansas & Missouri
Affiliated with Welch & Company (License #CO00000477)
Joseph E. Stephenson is a licensed real estate professional in Kansas and Missouri with a career built on dedication to integrity and client-focused service. To learn more about how Joseph can assist you in your real estate endeavors, visit his REALTOR® profile at realtor.com.
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Joseph E. Stephenson also operates a business named Stephenson Residential, LLC. You can verify the business at the Kansas Secretary of State’s website.
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