When you’re evaluating a rental property, here’s what you need to know about calculating its ROI so you can have a better idea about the true potential of your future investment. Trust Accounting Services ROI is short for return on investment—how much money or profit you’ll make on your investment. It’s typically expressed as a percentage over the cost of your investment (in this case, your rental property) and can reveal to you how effective or efficient your investment dollars are being put to good use. The calculation for the return on investment (ROI) of a rental property is similar to the cap rate. One difference is that the ROI is a more accurate measurement that includes more costs, such as the borrowing costs associated with a rental property mortgage. The cap rate assumes that you bought the house with cash to give you an overall sense of the rental's profitability, while the ROI is a more personal measure of how much you will earn. ROI (return on investment) measures the profit or gain made on an investment compared to the original cost of the investment, and is expressed as a percentage. There are endless means to invest your money. One investment consideration is an income property.
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