1. What Is Real Estate ROI?

ROI (Return on Investment) is a performance measure used to evaluate the efficiency or profitability of a real estate investment. It compares the gain from an investment relative to its cost.

2. How Does The Calculator Work?

The calculator uses the ROI formula:

Where:

• \( Gain \) — Total return from the investment
• \( Cost \) — Total cost of the investment

Explanation: This formula calculates the percentage return on a real estate investment by measuring the profit relative to the initial investment cost.

3. Importance Of ROI Calculation

Details: Calculating ROI helps investors compare different investment opportunities, assess performance, and make informed decisions about real estate purchases and sales.

4. Using The Calculator

Tips: Enter the total gain and total cost in your preferred currency. Both values must be positive numbers, and the cost must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good ROI in real estate?
A: A good ROI varies by market and property type, but generally, returns above 8-12% are considered good for rental properties.

Q2: Does ROI include ongoing expenses?
A: For accurate calculations, the cost should include all expenses (purchase price, repairs, maintenance) and gain should include all income minus expenses.

Q3: How does ROI differ from cash-on-cash return?
A: ROI considers total investment return, while cash-on-cash return focuses specifically on the cash income relative to the cash invested.

Q4: Should I use annual or total ROI?
A: It depends on your analysis. Annual ROI shows yearly performance, while total ROI shows overall investment performance.

Q5: What factors can affect real estate ROI?
A: Location, property condition, market trends, rental income, operating expenses, and financing terms all significantly impact ROI.