1. What is ROI in Real Estate?

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

2. How the ROI Calculator Works

The calculator uses the basic ROI formula:

Where:

• Net Income — Annual rental income minus all expenses
• Investment — Total cash invested in the property

Explanation: This simple ROI calculation helps investors quickly compare different investment opportunities.

3. Importance of ROI Calculation

Details: ROI helps real estate investors evaluate performance, compare properties, and make informed investment decisions. A good ROI varies by market but generally 8-12% is considered solid.

4. Using the Calculator

Tips: Enter your annual net income (after all expenses) and total cash invested. The calculator will show your ROI percentage. Higher percentages indicate better returns.

5. Frequently Asked Questions (FAQ)

Q1: What's a good ROI for rental properties?
A: Generally 8-12% is good, but this varies by location and property type. Always compare to local market averages.

Q2: Should I include mortgage payments in expenses?
A: Yes, include all expenses - mortgage, taxes, insurance, maintenance, vacancies, and property management.

Q3: How does this differ from cash-on-cash return?
A: Cash-on-cash return uses pre-tax cash flow, while ROI can use either pre-tax or after-tax figures depending on your inputs.

Q4: Does this account for appreciation?
A: No, this is a simple ROI calculation. For total return, you'd need to factor in appreciation and tax benefits.

Q5: What's better - high ROI or high cash flow?
A: It depends on your goals. ROI shows efficiency of capital, while cash flow shows actual dollars in your pocket.