Hampton Real Estate Investing & Real Estate Financial Planning™ Podcast · James Orr

Secrets of ROI versus Return on Equity

·1 hr 1 min·3 clips

James Orr calls it 'stupid' to invest in real estate without reserves.

The lesson starts with a clean split. James Orr treats ROI and return on equity as separate calculations, then keeps putting that split against ordinary property decisions. He is in teacher mode, but the point is practical: know which return belongs to the first purchase decision and which one helps later, when a property might be kept, sold, or refinanced. Reserves change the picture right away. He compares six months of reserves with twelve months of reserves because the spreadsheet gives different return numbers for each. Year one gets its own lane. The dashboard shows first-year return metrics, while the overrides tab lets the listener look out into projected future years. The spreadsheet is the classroom, and James makes the class pretty hands-on. He walks through return in dollars, appreciation, cash flow, debt paydown, cash flow from appreciation, and related estimates as numbers the listener can view, change, and compare. He keeps pulling the lesson back to use. Do these numbers help an investor understand the model and apply it to their own portfolio or deals? ROI has a ceiling in this setup. Later-year ROI is not really the same kind of calculation, though projected returns can still be inspected. Then equity gets poked hard. James calls equity imaginary and moves toward return on true net equity as the more useful way to decide what to do with a property. True net equity becomes the sharper tool in his framing, especially for future keep, sell, or refinance choices. The tone is plain and repetitive in a useful way. He circles the distinctions until the spreadsheet feels less like decoration and more like a working model.

As heard by us

A clear lesson on why the right return can change once equity starts moving.

Secrets of ROI versus Return on Equity turns a Hampton focused real estate lesson into a plain warning: the first year is only part of the story.

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Why you'd press play

When you want to compare year-one return on investment with return on equity as the numbers change over time.

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