1. What is ROI for Rental Property?

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

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• Annual Rental Income — Total yearly rent collected
• Annual Expenses — All property-related expenses (mortgage, taxes, maintenance, etc.)
• Total Investment — Purchase price plus any renovation costs

Explanation: The equation calculates what percentage of your investment you're earning back each year after expenses.

3. Importance of ROI Calculation

Details: 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 all values in dollars. Be sure to include all expenses for accurate results. Total investment should include purchase price plus any significant renovations or improvements.

5. Frequently Asked Questions (FAQ)

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

Q2: Should I include mortgage principal payments in expenses?
A: Include only the interest portion of mortgage payments, not principal, as principal payments build your equity.

Q3: How does ROI differ from cash-on-cash return?
A: ROI considers total investment while cash-on-cash return only considers actual cash invested (down payment).

Q4: Should I include property appreciation in ROI?
A: This calculator shows current cash flow ROI. For total return, you'd need to factor in appreciation separately.

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