Simple Formula
Net Profit = After-Repair Value (ARV) – All Costs
ROI = (Net Profit / Total Cash Invested) × 100%
What to Include in "All Costs"
| Category | Items |
|---|---|
| Acquisition | Winning bid, documentary stamps ($0.70/$100), recording fees, title search |
| Holding | Property taxes, insurance, utilities, HOA fees (while you own) |
| Improvements | Site prep, construction, permits, professional fees |
| Exit | Real estate commission (if using agent), closing costs, concessions |
Example Calculation
You buy a tax deed for $20,000. ARV is $150,000. Costs:
- Acquisition: $20,000 + stamps ($140) + recording ($30) = $20,170
- Holding (6 months): taxes $500, insurance $300 = $800
- Improvements: $30,000
- Exit costs: 6% commission $9,000 + closing $2,000 = $11,000
Total Costs: $20,170 + $800 + $30,000 + $11,000 = $61,970
Net Profit: $150,000 – $61,970 = $88,030
ROI: ($88,030 / $61,970) × 100% = 142%
Quick ROI Estimator Table
| ARV | Acquisition | Rehab | Holding | Exit Costs | Net Profit | ROI |
|---|---|---|---|---|---|---|
| $150k | $20k | $30k | $800 | $11k | $88,200 | 142% |
| $200k | $30k | $50k | $1,200 | $14k | $104,800 | 125% |
| $100k | $10k | $20k | $600 | $8k | $61,400 | 185% |
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