The Difference Between ROI and ROTI and Why it is Important!
We talk to investors every day, and the majority of them are very focused on their Return On Investment (ROI). This is very understandable, and it should be a key factor to look at before making any investment. However, most investors forget about the importance of their “Return On TIME Invested.”
Let us give you an example. Let’s say you have decided to invest in a house flipping project yourself. You are going to handle all renovations from start to finish and try to get the highest return possible. You have done all the due diligence needed and have purchased a home to transform. Now, you need to start the design and permit process, find all vendors, complete the remodeling, and then finally put it up for sale. Let’s say your project went very well, you sold the house, and you ended up with an ROI of 20%.
Now, let’s look at a different example. Let’s say you decided to invest passively in a house flipping project with a syndication firm, instead of completing all the work yourself. The syndicate has all systems in place, with experienced professionals handling every detail of the house flip project from start to finish, and you can make your investment online with a few clicks. You didn’t put any work in, and by the time the house sold, you end up with an ROI of 15%.
Which one really generated the best Return On Investment? The first example where you did all the work yourself had a higher ROI%. But you need to take your time and effort into consideration as well! If you calculate the time and work spent to complete the project, was all that worth an extra 5%?
Always consider your “Return On TIME Invested” when making your next investment.
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