1. What is ROI?

Return on Investment (ROI) is a financial metric used to evaluate the efficiency or profitability of an investment. It compares the net income generated by an investment to its cost.

2. How Does the Calculator Work?

The calculator uses the ROI equation:

Where:

• \( Net Income \) — Total income generated by the investment
• \( Investment Cost \) — Total amount invested

Explanation: The equation calculates what percentage return you're getting on your investment.

3. Importance of ROI Calculation

Details: ROI helps investors compare different investment opportunities and determine which properties or ventures are likely to provide the best returns.

4. Using the Calculator

Tips: Enter net income and investment cost in dollars. Both values must be positive numbers (investment cost cannot be zero).

5. Frequently Asked Questions (FAQ)

Q1: What is a good ROI for real estate?
A: Typically, a good ROI for rental properties is 8-12%, but this varies by market and property type.

Q2: How is net income calculated?
A: Net income = Total rental income - Operating expenses (mortgage, taxes, maintenance, etc.)

Q3: Should I include property appreciation in ROI?
A: This calculator focuses on cash flow ROI. For total return, you'd need to include appreciation when you sell.

Q4: What are limitations of ROI?
A: ROI doesn't account for time (use IRR for that) or risk. It's best used to compare similar investments.

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