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THE ROOTS

ROI

All Terms
Core termInvestment & Rental PropertiesInvesting

Definition

ROI is total gain or loss relative to investment amount, including cash flow, tax benefits, principal paydown, and appreciation. Calculate consistently across properties.

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About this term

ROI is a comprehensive metric that includes rental income, tax benefits, principal paydown, and property appreciation. Real estate investors often calculate ROI over different time horizons (1-year, 5-year, 10-year) to assess both short-term cash returns and long-term wealth building. A complete ROI calculation requires accounting for all expenses, including taxes, insurance, maintenance, and vacancy.

Pro Tip

Calculate ROI consistently to make meaningful comparisons.

Example

A property purchased for $200,000 generating $8,000 annual cash flow plus $10,000 appreciation equals 9% annual ROI

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