1. What is ROI for Rental Property?

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

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 expenses (mortgage, taxes, maintenance, etc.)
• Total Investment — Purchase price plus any renovation costs

Explanation: The equation calculates the percentage return you earn on your invested capital each year.

3. Importance of ROI Calculation

Details: ROI helps investors compare different property investments, assess performance, and make informed buying/selling decisions.

4. Using the Calculator

Tips: Enter all values in dollars. Be sure to include all 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 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, not principal repayment.

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 property appreciation in ROI?
A: This calculator shows current ROI based on income. For total return, appreciation should be considered separately.

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