A real estate investment with a 100% ROI in 1 year?Let’s show why this isn’t possible.

By Ola.

Primarily the reason why you invest is to make money. This is why you need to evaluate your investments properly to determine which will give you real value.

There are many different investment options, such as bonds, stocks, treasury bills, and even real estate. But the question most times is, how can you evenly compare each investment to determine the “best” for you?

Return on Investment (ROI) is one common metric used to determine how much money you will earn relative to your investment. It is usually shown as a percentage and can be a useful metric when comparing different investment opportunities.

Another common metric used is the annualized Internal Rate of Return, which shows the percentage return you earn from your investment on an annual basis. Unlike the ROI, the IRR gives you an annual % return.

HOW TO CALCULATE ROI & WHY 100% IS ABSURD.

Calculating ROI is really simple trust me. To determine your ROI, take the profit from an investment and divide it by the cost of that investment, then multiply it by 100.

ROI formula ROI = [(current value of investment — cost of investment) / cost of investment] x 100

See? It’s as simple as that. Now, let’s look at how this would be applied in a real-life scenario: Let’s say Ozo buys a home from fake real estate developer limited. He pays N50,000,000 (inclusive of all other fees) for the home and they say he will get 100% in 12 months.

Now, let’s assume he sells them a year later for N55,000,000. What was his ROI?

To calculate the return on Ozo’s investment, take the profit (N50,000,000 — N55,000,000 = N5,000,000) and divide it by his total investment cost (N50,000,000) then multiply by 100 percent. This gives an ROI of 10%.

Why do we believe a 100% ROI in 1 year isn’t possible or even 400% in 2 years (Haba!). For Ozo to get a 100% ROI, how much do you think he will need to sell the home for, one year later?

Abracadabra! He will need to sell to for N100,000,000. Now, how for this to happen, Ozo home market value must grow by ~8% (100/12) month on month (MoM). While this might seem possible, it can also be very impossible. According to data from Northcourt Real Estate, Abraham Adesanya, Ajah, Lagos has seen the highest home/land market value growth — approximately 41% over the last 4 years. This is ~1% MoM and a 10.25% yearly IRR.

Now, with this, ask fake real estate developer limited where in this WORLD is there development going to be and come from! Focus and don’t lose guard while investing!

This is why we created roofonecapital.com. At Roofone, you can see the IRR on each property and properly estimate the potential ROI in that property.