Prudent investors focus on Return on Investment (ROI ) to guide them in real estate investments . Recently, there has been so much garbage that has sprung up about flipping real estate that much of the investment advice is downright harmful, due mostly to the ease at which information can be spread on the internet.

Todays blog is the third and final post in a series discussing real estate investments, starting with How To Place A Value On Your Home and continuing with Fridays post about utilizing a Long-Term Real Estate Strategy. Today, we will look at a real world example using an available listing in the Tallahassee real estate market. This same example format could be used anywhere.

Before we get into the details of our example, I would like to address the reader question that lead to this real estate investment series. A long-time reader asked

Joe, your blog and market reports say that we will see home values drop for 2 more years, but you also say that you think things will be good after all of this passes. What is your advice to somebody who wants to invest in real estate. Should I wait 2 more years until values bottom out?

This question is very typical, and that is why (see post title) I advise that ROI should guide real estate investments. If you think prices are dropping, but will resume rising, you can create a model to determine if investing now makes sense. Think about this, if the ROI you can achieve with a wise real estate investment is significantly higher than any other you can find, what choice do you have? You can choose a lower ROI because (prices are dropping), or you can choose a higher ROI because it is available.

The mistakes being made by those who are waiting center on the market. Nobody locally is large enough to buy the market, so they should focus on individual opportunities. Not everything is sold at market value, so if you are a single-property investor, you can find a deal that gets you in and will help you secure a better-than-market return on your investment.

An ROI Real Estate Investment Example

The following example is available today. This is not theory, rather a real-world example of what an investor could choose to do today. The only way one can refute the results at this time by refuting any of the key assumptions used to evaluate the opportunity.

In the example below, I have shown that a $21,600 investment will yield an annualized return exceeding 16% if the investor will hold the property until the property sell strategy (explained below) is attainable.