How to Calculate the Investment Amount
The first step in calculating a return is estimating the amount that you need to invest. Note you will need more than QuickBooks 2013 to make this calculation. Your best bet is to use Microsoft Excel. The amount you need to invest is similar to the check you write to a bank in order to buy a CD.
Suppose that you’re considering the purchase of a new office building. Just to keep everything really simple, suppose that you can buy a building that would house your offices for $350,000. Further suppose that you can finance $300,000 of this purchase with a mortgage from your friendly local bank. However, you also need to pay closing costs that equal $15,000.
The following table shows the initial investment that you must make in order to invest in a new office building. The bottom-line amount is $65,000. The table shows how this amount gets calculated. The formula is pretty simple: The building costs $350,000, and you must pay $15,000 in closing costs. That totals $365,000.
The bank, however, will finance $300,000 of this amount. This means that you need to come up with $65,000 out of your own pocket.
|Price of building||$350,000|
|Add: Closing costs||15,000|
|Total initial investment||$65,000|
Make sure that you understand why the initial investment, or the first check that you need to write, is $65,000. This is the investment that you make in the building.
In looking at the example of investing in an office building, for example, knowing what you have been paying in rent and what you may be able to save by buying your own building is exactly the sort of information that you need — and exactly the sort of information that the rich financial database of QuickBooks supplies.