1. What is ROI for 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 investment cost, expressed as a percentage.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( \text{Net Income} \) — Annual rental income minus all expenses (USD/year)
• \( \text{Investment Cost} \) — Total initial investment in the property (USD)

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

3. Importance of ROI Calculation

Details: ROI helps investors compare different rental properties, assess investment performance, and make informed buying decisions.

4. Using the Calculator

Tips: Enter accurate net income (after all expenses) and total investment cost. Both values must be positive numbers.

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 property type.

Q2: Should I include mortgage payments in expenses?
A: Only include interest portion of mortgage payments, not principal payments.

Q3: What expenses should be included?
A: Include property taxes, insurance, maintenance, vacancies, property management, and repairs.

Q4: How does ROI differ from cap rate?
A: Cap rate doesn't include financing costs, while ROI accounts for all expenses including mortgage interest.

Q5: Should I consider appreciation in ROI?
A: This calculator shows cash-on-cash ROI. For total return, you'd need to factor in appreciation separately.