Real Estate ROI Calculator

Return on investment (ROI) for property measures how much profit you make relative to what the property cost. This calculator takes the full return, price appreciation plus the rental income you keep after expenses, and states it as a percentage of the purchase price. It also gives the annualized equivalent, so you can compare a five-year hold against a two-year one on equal footing.

What this calculator computes: Total ROI = (Appreciation + Net rental income over the holding period) / Purchase price × 100%

Appreciation is Current value minus Purchase price. Net rental income is (Annual rent minus Annual expenses) × Years held. The annualized figure is the steady yearly rate that compounds to that same total.

This is an unleveraged return: it divides by the full purchase price, not by a down payment. If you buy with a mortgage, your cash-on-cash return on the deposit alone is higher (and riskier), because a small slice of cash controls the whole asset. To see that number, divide the same gains by the cash you actually put in.

Gross rental yield (a quick sanity check): Gross yield = Annual rent / Property value × 100%. Useful for comparing listings before you dig into expenses.

What to include in annual expenses:

• Property management fees (8-12% of rent if managed)
• Maintenance allowance (about 1% of property value per year is a common estimate)
• Property insurance, plus landlord liability where it applies
• Property taxes
• Vacancy allowance (budget for 1-2 months a year with no tenant)
• HOA dues and any licensing or inspection fees

Worked example: Purchase price: $250,000 Current value: $310,000 Annual rental income: $24,000 Annual expenses: $8,000 Years held: 5

Appreciation = $310,000 − $250,000 = $60,000 Net rental income = ($24,000 − $8,000) × 5 = $80,000 Total gain = $140,000 Total ROI = $140,000 / $250,000 = 56.0% over five years, about 9.3% annualized.

Appreciation and cash flow both count. In pricey coastal markets most of the return tends to come from appreciation; in cheaper high-yield markets it comes from rent. A rental that shows positive cash flow after every expense means you are not betting the whole return on prices continuing to rise.