1. What is ROI in Rental Property?

ROI (Return on Investment) measures the profitability of a rental property investment by comparing the annual profit to the total amount invested. It helps investors evaluate and compare different investment opportunities.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• Annual Rental Income — Total yearly income from rent
• Annual Expenses — All property-related yearly expenses
• Total Investment — Total amount invested in the property

Explanation: The formula calculates the percentage return on your investment by showing how much profit you make relative to your total investment.

3. Importance of ROI Calculation

Details: Calculating ROI helps investors determine if a property is a good investment, compare different properties, and make informed decisions about where to allocate capital.

4. Using the Calculator

Tips: Enter all values in dollars. Include all expenses (mortgage, taxes, insurance, maintenance, etc.) and be realistic about rental income potential.

5. Frequently Asked Questions (FAQ)

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

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

Q3: How does vacancy affect ROI?
A: Vacancy should be accounted for in your annual rental income estimate (typically 5-10% reduction).

Q4: What other metrics should I consider?
A: Also consider cash flow, cap rate, and appreciation potential when evaluating properties.

Q5: How accurate is this calculator?
A: It provides a basic ROI calculation. For precise analysis, consult a real estate professional.