WHAT IS AN EQUITY MULTIPLE?

TRANSCRIPT:

A common term in real estate is equity multiple, and what this is is a measure of how much money you're going to get back based on your initial investment.

So an equity multiple of less than one means you're going to get back less than you put it, so you don't want to go there. 1.0 means you're going to get back exactly what you put in.

So you're looking for investments that are greater than a 1X multiple.

So let's say, for example, that you have an investment you're looking at that says it's got 2.5 X multiple. That means that for every dollar you put in, you're going to get out two and a half dollars. Now that includes your initial investment, so you're going to put in $1.00.

And when it's all said and done and you're going to get out that original dollar plus an other dollar and a half, so 2.5 X multiple means you're going to more than double your money.

Hope that clears it up.