1. What is ROI on Rental Property?

Return on Investment (ROI) measures the profitability of a rental property investment. It compares the net income generated by the property to the total amount invested, expressed as a percentage.

2. How Does the Calculator Work?

The calculator uses the basic ROI formula:

Where:

• Net Income — Annual rental income minus all expenses (mortgage, taxes, maintenance, etc.)
• Investment Cost — Total amount invested in the property (purchase price + renovations + other costs)

Explanation: The formula shows what percentage return you're earning on your invested capital each year.

3. Importance of ROI Calculation

Details: Calculating ROI helps investors compare different property investments, assess performance, and make informed decisions about buying, holding, or selling properties.

4. Using the Calculator

Tips: Enter your property's annual net income and total investment cost in dollars. Be sure to include all relevant expenses and costs for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What's a good ROI for rental property?
A: Generally, 8-12% is considered good, but this varies by market and investor goals.

Q2: Should I include mortgage payments in expenses?
A: Yes, all operating expenses including mortgage payments should be included in the net income calculation.

Q3: How does this differ from cap rate?
A: Cap rate doesn't include financing costs, while ROI does. ROI gives a more complete picture of your actual return.

Q4: Should I include property appreciation?
A: This basic calculation doesn't include appreciation, which would require a more complex analysis.

Q5: How often should I calculate ROI?
A: At least annually, or whenever significant changes occur in income or expenses.