ROI calculation for real estate from foreclosure

Introduction: Why ROI Calculation is Crucial

Return on Investment (ROI) is the key metric when it comes to assessing the success of a real estate investment - especially for properties from foreclosure auctions. While traditional property purchases are usually based on market values, auctions provide the opportunity to start significantly cheaper. This is precisely why a precise ROI analysis is essential to separate opportunities from risks and to understand the actual return. Platforms like LocalAuction.ch make it possible today to compare all official auctions in Switzerland in one place and to make profitable decisions based on real data.

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Basics of ROI Calculation in Foreclosure Auctions

ROI measures how much profit an investment generates in relation to the capital invested. The formula is:

ROI = (Profit / Invested Capital) × 100

For properties from foreclosure auctions, profit typically consists of three components:

• the value difference between estimated value and purchase price,
• the rental income or ongoing cash flows,
• and a possible appreciation through renovation or market development.

Depending on the strategy - short-term resale (Fix & Flip) or long-term rental - ROI is calculated and interpreted differently.

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Example ROI Calculation: From Auction to Return

Case Study: Income Property in Aargau (AG)

An investor wins an auction for a multi-family house with an official estimated value of CHF 1,000,000 for CHF 800,000. After renovations costing CHF 100,000 and additional costs of CHF 20,000, the total investments amount to CHF 920,000.

Item	Amount (CHF)
Purchase Price (Foreclosure)	800'000
Renovation	100'000
Additional Costs (Notary, Fees, Taxes)	20'000
Total Investment	920'000
Market Value After Renovation	1'100'000
Value Increase	+180'000
Annual Net Rental Income	45'000

ROI on Sale

ROI = (Profit / Investment) × 100 = (180'000 / 920'000) × 100 = 19.6 %

ROI on Rental (Annually)

ROI = (Net Yield / Investment) × 100 = (45'000 / 920'000) × 100 = 4.9 %

This results in a short-term as well as a long-term added value that makes the investment attractive compared to conventional investment options.

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Influencing Factors on ROI

ROI is influenced by several factors that investors should consider in their calculations:

1. Location and Market Development

Properties in growth regions like Zurich (ZH), Zug (ZG), or Vaud (VD) offer higher entry prices, but also stable rental yields and value increases. In emerging cantons like Solothurn (SO), Fribourg (FR), or Thurgau (TG), above-average margins can be achieved if market trends are recognized early.

2. Renovation Strategy

Targeted renovations focusing on energy-efficient measures (e.g., heat pumps, insulation, solar systems) not only increase the property value but also reduce additional costs - a crucial factor for long-term stable returns.

3. Financing and Equity Ratio

Since a down payment of 10% of the estimated value is often required in foreclosure auctions, the equity ratio significantly affects the effective ROI. The higher the proportion of debt capital with low interest rates, the greater the leverage effect on equity returns can be.

Equity Return (Leverage Effect) = (Total Return / Equity Share) × 100

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ROI Simulations for Different Scenarios

Strategy	Time Horizon	ROI (Estimated)	Example Region
Fix & Flip	6-18 Months	15-25 %	Basel-Stadt (BS)
Buy & Hold (Rental)	5-10 Years	3-6 % Annually	Bern (BE)
Project Development	2-5 Years	20-40 %	Ticino (TI)

These values show: The ROI on foreclosure auctions strongly depends on the strategy, location, and investment horizon.

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Tax and Legal Aspects

When calculating the actual ROI, tax factors must not be overlooked. In Switzerland, capital gains tax usually applies to profits from property sales, the amount of which varies by canton.

Examples of Cantonal Differences:

• Zug (ZG): low tax rates, ideal for short-term resales
• Bern (BE): progressive tax depending on holding period
• Vaud (VD): higher rates, but stable market prices

Additional costs such as property transfer tax, renovation deductions, or interest expenses also affect the effective ROI and should already be included in the calculations.

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How LocalAuction.ch Facilitates ROI Analysis

LocalAuction.ch not only provides investors access to all official foreclosure auctions but also serves as a basis for precise profitability analyses:

• Comparison of estimated values and winning bids
• Identification of investment properties with potential
• Regional market statistics on bid amounts and demand
• Download relevant documents (appraisals, land register, site plans)

This allows the ROI to be assessed thoroughly even before participating in an auction - a decisive advantage over the traditional market.

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Conclusion: Returns with a System Instead of Chance

The ROI calculation is much more than a theoretical metric - it is the foundation of every successful investment decision. Especially when it comes to properties from foreclosure auctions, it enables the recognition of hidden potentials and the minimization of risks. Those who base their decisions on solid data and clear calculations can not only achieve attractive returns but also build wealth sustainably. With LocalAuction.ch, investors now have access to a central tool to efficiently, transparently, and professionally capitalize on these opportunities.