ROI Calculation Checklist Before Paying a Deposit

Why calculate ROI before you pay a deposit? 📌

Paying a deposit commits you emotionally and legally. Calculating ROI first gives a clear picture of potential return and possible downside, so you make a decision based on numbers and scenarios, not impulse.

Prepare these documents and data 🗂️

• Listing or offering sheet and floor plan.
• Expected income: long-term rent, short-term rent, or resale potential.
• Recurring costs: taxes, utilities, management fees, insurance.
• One‑off costs: repairs, legal fees, registration, agency fees.
• Contract terms that govern the deposit: refund conditions and deadlines.

Step-by-step ROI checklist ✅

1) Define your main objective.

• Pure investment for rental income — focus on annual net cash flow.
• Buy-to-sell — focus on projected resale price and time to sale.
• Owner-occupier with occasional rent — combine both income streams.

2) Estimate annual income realistically.

• For rentals, use average market rents and account for vacancy or seasonality.
• For flip scenarios, consider likely holding period and market conditions.

3) Tally operating expenses.

• Fixed: property taxes, HOA/condo fees, insurance, management.
• Variable: repairs, tenant turnover, vacancy periods.

4) Count one‑time investments into total capital.

• Renovation, legal checks, registration costs, initial furnishing.
• Remember: the deposit is only part of invested capital.

5) Use a simple ROI formula for a directional view.

• Simple approach: annual net income divided by total invested capital.
• Compare that rate to alternative uses of your funds.

6) Test sensitivity and timing.

• How does ROI change if rent is lower or vacancy higher?
• What happens if sale is delayed?

7) Review deposit terms and related risks.

• Who holds the deposit and under what conditions is it refundable?
• Can the seller forfeit the deposit? Is there a written agreement?

8) Build scenarios: best, likely, worst.

• Recalculate ROI for each scenario and determine break‑even points.

Practical advice and examples 📋

• Focus first on the structure of costs and horizon rather than precise numbers — this helps adapt the model to market changes.
• Ask the seller for data on past rental income in the building or area rather than relying solely on an ad.
• A thorough legal review often costs less than a lost deposit in a dispute.

How to reduce deposit-related risks 🔒

• Put clear refund conditions into the pre-contract: timeframes, contingencies, and penalties.
• Where possible, use escrow or a notarised deposit arrangement.
• List specific events entitling either party to cancel with or without financial consequences.

Quick pre‑signature checklist

• Purpose of purchase and expected income documented.
• All expenses and one‑off costs included in the ROI model.
• Scenario analysis completed (optimistic, realistic, pessimistic).
• Deposit agreement spells out refund terms and deadlines.
• Legal due diligence completed.

A short note of empathy 🤝

Making a property decision can feel overwhelming. Follow the checklist step by step, and you’ll gain clarity and confidence. If you’d like, our team can run ROI calculations for your target properties, check documents, and suggest safe deposit clauses.

Contact us for a detailed consultation or start searching properties on https://buyhome.ge/en/search — we’ll assist you with calculations and document checks.