Hello, this is Shuo. So how would you assess if an investment is generating your desired returns?
AAR, Average Annual Return, is a good measurement. So, this is the average yearly percentage of a total return on investment, which includes the cash flow from distributions and profits at sale.
For example, with a $100,000 investment over five years- if you are receiving $800,000 overall, to calculate your average annual return, you will use 800,000 divided by 100,000 divided by five, which is 16%.
And vice versa if you have your investment capital set in mind and you’re given a projected AAR, you can calculate how much capital you’re expected to receive over the course of your investment.
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Patrick Grimes is a design engineer and CEO and Founder of Invest on Main Street, LLC. His real estate holdings include general partner ownership of a multifamily and single-family real estate portfolio valued over $146M, including 1,950+ units across the southeastern United States and Texas.
He has been active in real estate investment since 2007, including purchasing land and distressed assets, renovating them, and stabilizing them for long-term cash flow. To scale his real estate portfolio, Patrick moved from single-family to multifamily investing and founded Invest on Main Street, a private equity firm specializing in multifamily value-add projects in emerging markets.