1. What is a Real Estate Investment Calculator?

Definition: This calculator determines the Return on Investment (ROI) percentage for real estate investments based on net profit and investment cost.

Purpose: It helps investors evaluate the profitability of real estate deals and compare different investment opportunities.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( ROI \) — Return on investment (percentage)
• \( Net\ Profit \) — Total profit after expenses (USD)
• \( Investment\ Cost \) — Initial investment amount (USD)

Explanation: The formula calculates what percentage of the original investment was returned as profit.

3. Importance of ROI Calculation

Details: ROI helps investors assess performance, make informed decisions, and compare different investment opportunities objectively.

4. Using the Calculator

Tips: Enter the net profit (total revenue minus all expenses) and the total investment cost. Investment cost must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good ROI in real estate?
A: Typically 8-12% is good, but this varies by market and property type. Higher risk investments generally demand higher ROI.

Q2: Should I include mortgage payments in investment cost?
A: Yes, all costs associated with acquiring and maintaining the property should be included in the investment cost.

Q3: How is net profit calculated?
A: Net profit = (Sale Price + Rental Income) - (Purchase Price + Renovation Costs + Maintenance + Taxes + Fees).

Q4: Does this calculator account for time value of money?
A: No, this is a simple ROI calculation. For time-adjusted returns, consider using an IRR (Internal Rate of Return) calculator.

Q5: What's the difference between ROI and ROE?
A: ROI measures return on total investment, while ROE (Return on Equity) measures return only on your actual cash invested (after financing).