1. What is ROI in Rental Property?

ROI (Return on Investment) 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:

• Net Income — Annual rental income minus all expenses (mortgage, taxes, maintenance, etc.)
• Investment Cost — Total initial investment (purchase price + renovations + closing costs)

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

3. Importance of ROI Calculation

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

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

Q2: Should I include mortgage principal in expenses?
A: No, only include interest payments. Principal payments increase your equity.

Q3: How does ROI differ from cash-on-cash return?
A: Cash-on-cash only considers actual cash invested, while ROI considers total property value.

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

Q5: How often should I recalculate ROI?
A: Annually, or whenever significant changes occur (rent increases, major repairs, refinancing).