What Is ROI On Real Estate Investments And How Do I Calculate It?

Jun 27, 2024

5-minute read

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For both experienced and first-time investors, being able to calculate return on investment (ROI) is a powerful tool that increases the chance of a profitable investment. But what exactly is ROI, and how do you calculate it?

What Is ROI In Real Estate Investing?

Return on investment (ROI) is a metric that helps real estate investors evaluate whether they should buy an investment property or compare one investment to another. ROI allows investors to predict, based on comparables, the profit margin they should realize on their real estate – either through flipping homes or renting properties – as a percentage of cost.

It’s also important to note the many factors that can affect the ROI on a property. This includes (but is not limited to) the following:

  • Real estate market conditions
  • Property purchase price
  • Interest rates
  • Type of property
  • Building material costs
  • Location

When it comes to real estate investments, ROI is an important tool for any investor regardless of their experience level. It provides a concrete, factual look at how profitable a potential investment might be.

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