If you buy an empty lot for $100,000, pay a total of $5,000 in taxes for five years, and then sell the lot for $150,000, your return on investment (ROI) is:

Purchase price (Po) = $100,000 Cost of ownership and upgrades (C) = $5,000 Today’s Price (P t) = $150,000 ROI = [Pt − (Po + C)]/Po ROI = [$150,000 − ($100,000 + $5,000)]/$100,000 ROI = $45,000/$100,000 = 0.45 or 45%

ROI of 45%/5 years = 9% ROI per year 1. Now suppose you have built a house on the property for $180,000 and you are able to sell the lot with the newly built home for $220,000. What is the ROI now?