Here’s a scenario: You just closed on an awesome investment property and you eagerly share the big news with your friends.
“What’s the ROI [return on investment]?” they ask.
“It’s amazing!” you say. “It’s …”
Then it hits you. You’re not sure how to answer the question, because there are a number of possible answers.
Are they talking about capitalization rate? Cash-on-cash return? Internal rate of return? Cash flow? Appreciation?
Every investor has their own understanding of what an "amazing" ROI is. In this article, we’ll look at defining your investment goals (namely, cash flow vs. appreciation) and run through the primary formulas for calculating rental property ROI.
Check out the full article I wrote that was published on Roofstock!