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

Secrets of ROI versus Return on Equity

·1 hr 1 min·4 clips

Return on equity asks what you earn on the equity still tied up in the property, not the original purchase money.

Returns are taught through the spreadsheet. James opens this Real Estate Investing Secrets course module with return on investment versus return on equity, then keeps it practical: where the numbers sit, what they mean, and why the answer changes when the year changes. The dashboard comes first because that is where the year-one return figures live, including the return on investment quadrant. Then he widens the view. What if someone wants returns in dollars after year one? That question sends the lesson to the overrides tab, where assumptions can be changed and the math can be checked instead of treating the first dashboard number as the whole story. Reserves get their own pass. James points to six months of reserves and twelve months of reserves in the return in dollars quadrant, then follows the spreadsheet out as far as forty years. That turns the lesson from a first-year metric into a modeled scenario. Appreciation, cash flow, debt paid out, and cash flow from depreciation are kept separate, which is the useful part. James keeps coming back to why return on investment is shown for year one and why it gets less helpful farther out. The Lowell sponsor message at the end lands in the same lane: higher prices and mortgage interest rates have made cash flow harder, even with rents up. When cash flow is tight, the return measure you choose is not trivia. It is part of how you avoid fooling yourself.

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