The Return on Equity Quadrant™ is the amount, in dollars, of each of the four primary returns in a real estate investment divided by the current equity in the property.
The four primary areas of return are:
- Cash Flow
- Cash Flow from Depreciation
- Debt Paydown
We typically display this graphically as:
Or, with some numbers filled in like this:
Check it out for yourself by editting one from your Properties page.
If we divide the amount of the return in dollars by the initial investment (instead of the total equity) for each quadrant, we get the Return on Investment Quadrant™.
You can see the Return on Equity Quadrant™ on The World's Greatest Real Estate Deal Analysis Spreadsheet™ along with the Return on Investment Quadrant™.
I discuss the Return on Investment Quadrant™ and Return on Equity Quadrant™ in detail in the book How to Achieve Financial Independence and Live Your Passion Regardless of Age or Income as well as several classes I've taught.