What is ROI?
Return on investment measures the profitability of a rental property over a specific period of time and is expressed as a percentage, In other words, the ROI calculation process allows you to see whether investing in a particular property is a wise decision.
Here are some methods you can use to calculate the ROI on your property.
The simple ROI calculation: it is expressed as a percentage, you can compare the effectiveness or profitability of different investment choices
Capitalization rate (or cap rate): it is a financial metric used by investors to calculate what the rate of return from an investment is based on the net operating income the property currently or should produce and the property value or price.
Cash-on-cash return: Cash-on-cash return is a rate of return ratio that calculates the total cash earned on the total cash invested.
This is how you can calculate the ROI on a rental property
The simple ROI calculation : ROI = (Annual Rental Income – Annual Operating Costs) / Mortgage Value
Capitalization rate (or cap rate): Cap Rate = Net Operating Income / Purchase Price × 100%
Cash-on-cash return: Cash-on-Cash Return = (Annual Cash Flow / Total Cash Invested) × 100%
Manage Your Rental With Rentomatic
The goal of managing rentals is to generate passive income, which is why it’s important to know how to calculate ROI for your property. You can manually calculate the ROI percentage per property or use the Rentomatic Property management to provide all the numbers you need to see how profitable your rental is.
Create an account to help you manage your rental properties, collect rental fees, handle rental property accounting, and track maintenance requests — all in one place.
