Return on investment
Rental property ROI
Return on investment (ROI) captures the total benefit of owning a rental — not just monthly cash flow, but also appreciation and the equity you build as tenants pay down the loan.
Annual ROI
(Cash flow + Principal paydown + Appreciation) ÷ Total cash invested × 100
Example: ($3,000 + $4,200 + $9,000) ÷ $75,000 = 21.6% annual ROI
The four ways rentals make money
Investors typically count cash flow, loan principal paydown, appreciation, and tax benefits such as depreciation. Cash flow is the most certain; appreciation is the most variable, so conservative investors model it modestly or exclude it.
ROI for flips and new construction
For flips and ground-up builds, ROI is driven by profit at sale relative to cash invested and the time it takes. Annualizing the return makes a six-month flip comparable to a two-year build.
How Envestor helps
- Return metrics for rentals, flips, and new construction
- Annualized returns so projects of different lengths compare fairly
- Seller net sheet to estimate proceeds at exit
- Printable reports that show every assumption
Free account includes a property analysis. No credit card required.
Frequently asked questions
- What is a good ROI on a rental property?
- Many investors consider a total annual ROI above 10–15% strong, but it depends on leverage, market, and how much appreciation you assume.
- How is ROI different from cap rate?
- Cap rate is an unleveraged income yield on price. ROI measures your total return on the cash you invested, including equity growth.