1. What is Rental Return on Investment?

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
• Expenses — Annual operating costs (maintenance, taxes, etc.)
• Investment — Total amount invested in the property

Explanation: The formula calculates the percentage return you earn on your investment each year after accounting for expenses.

3. Importance of ROI Calculation

Details: ROI helps investors compare different rental properties, assess investment performance, and make informed purchasing decisions.

4. Using the Calculator

Tips: Enter all values in USD. Include all income and expenses to get an accurate ROI calculation. Investment should be the total purchase price plus any renovation costs.

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 property type.

Q2: Should I include mortgage payments in expenses?
A: No, only include operating expenses. Mortgage payments are part of your financing, not the property's operating costs.

Q3: How does ROI differ from cash-on-cash return?
A: ROI considers total investment, while cash-on-cash return only considers actual cash invested (after financing).

Q4: Should I include property appreciation in ROI?
A: This calculator measures annual operating ROI. For total return, you'd need to include appreciation and tax benefits.

Q5: How often should I calculate ROI?
A: Recalculate annually to track performance, and before making any major investment decisions.