1. What is the ROI Calculation?

The ROI (Return on Investment) calculation helps determine if a rental property is worth investing in by comparing the annual profit to the total investment. It provides a percentage that indicates the annual return on your property investment.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• Annual Rental Income — Total yearly income from rent
• Annual Expenses — Total yearly expenses (mortgage, taxes, maintenance, etc.)
• Total Investment — Total amount invested in the property

Explanation: The equation calculates the percentage return on your investment by comparing net annual profit to total investment.

3. Importance of ROI Calculation

Details: ROI helps investors compare different investment opportunities and determine if a property will generate sufficient returns to justify the investment.

4. Using the Calculator

Tips: Enter all values in dollars. Be sure to include all relevant expenses to get an accurate ROI calculation. Total investment must be greater than zero.

5. Frequently Asked Questions (FAQ)

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

Q2: Should I include mortgage payments in expenses?
A: Yes, mortgage payments (principal + interest) should be included in annual expenses.

Q3: What other expenses should I consider?
A: Include property taxes, insurance, maintenance, vacancies, property management fees, and repairs.

Q4: How does ROI differ from cash flow?
A: ROI measures percentage return on total investment, while cash flow measures actual dollars remaining after expenses.

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