1. What is ROI in Rental Properties?

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

2. How the Calculator Works

The calculator uses the basic ROI formula:

Where:

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

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

3. Importance of ROI Calculation

Details: Calculating 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 your annual net income (after all expenses) and total investment cost. Be sure to include all relevant costs in your calculations for accurate results.

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, all expenses including mortgage payments, taxes, insurance, and maintenance should be included in net income calculation.

Q3: How does this differ from cap rate?
A: Cap rate doesn't include financing costs, while ROI accounts for all expenses including mortgage payments.

Q4: Should I consider appreciation in ROI?
A: This calculator shows cash-on-cash return. For total return, you'd need to factor in property appreciation.

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