1. What is Investment Property ROI?

Return on Investment (ROI) measures the profitability of an investment property by comparing its net operating income to its total cost. It helps investors evaluate the potential return of different properties.

2. How Does the Calculator Work?

The calculator uses the ROI formula:

Where:

• \( NOI \) — Net Operating Income (annual income after expenses)
• \( Cost \) — Total property acquisition cost (purchase price + improvements)

Explanation: The formula calculates what percentage of the property cost is returned as profit each year.

3. Importance of ROI Calculation

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

4. Using the Calculator

Tips: Enter accurate NOI (rental income minus operating expenses) and total property cost. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: Should I include mortgage payments in NOI?
A: No, NOI should exclude financing costs but include all operating expenses (taxes, insurance, maintenance, etc.).

Q3: How does ROI differ from cap rate?
A: Cap rate uses current market value in denominator while ROI uses actual purchase price.

Q4: What expenses should be included in NOI?
A: Include property taxes, insurance, maintenance, utilities (if paid by owner), property management, and vacancy allowance.

Q5: How can I improve my property's ROI?
A: Increase income (raise rents, add units), reduce expenses, or purchase at a lower price.