1. What is Real Estate ROI?

Return on Investment (ROI) in real estate measures the profitability of an investment property. 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.)
• Total Investment — Purchase price plus any renovation costs and other initial expenses

Explanation: The formula shows what percentage of your investment you're earning back each year.

3. Importance of ROI Calculation

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

4. Using the Calculator

Tips: Enter your net annual income (after all expenses) and total amount invested in the property. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a good ROI in real estate?
A: Generally, 8-12% is considered good, but this varies by market and property type. Higher risk investments typically demand higher ROI.

Q2: Should I include mortgage payments in expenses?
A: Yes, mortgage payments (principal + interest) should be included in your expense calculations for accurate ROI.

Q3: How does this differ from cap rate?
A: Cap rate uses property value rather than total investment and doesn't include financing costs. ROI gives a more personal picture of your return.

Q4: Should I include appreciation in ROI?
A: This calculator shows cash-on-cash return. For total ROI, you'd need to factor in appreciation when you sell the property.

Q5: How often should I calculate ROI?
A: Recalculate annually or whenever significant changes occur (rent increases, major repairs, refinancing, etc.).