How to Calculate ROI (Return on Investment) for Real Estate

Ever wondered if a property is worth your investment? Let me show you how to calculate ROI to make smarter decisions!

For starters what is the definition of ROI (Return on Investment) - It is the calculation of the monetary value of an investment versus its cost. The formula to calculate the ROI is: (Net Profit / Total Investment) x 100. Let's use an example to clarify how it works.

To calculate ROI:

1. Find Your Net Profit: Subtract all expenses (purchase price, repairs, closing costs) from the sale price. Let’s say you made $60,000

   
   

2. Divide by Total Investment: If you spent $150,000 on the deal, divide $60,000 by $150,000.

   
   

3. Multiply by 100 for a Percentage: $60,000 ÷ $150,000 = 0.4 or 40% ROI.

This tells you how much you’re earning relative to your investment. A higher ROI means a better deal!”

The information in this article are of the experience and opinion of the author. Due diligence should always be done before investing in real estate.

ROI (Return on Investment)