Formula
Costs reduce the gain:
ROI = (sale − purchase + net rent − costs) / purchase
Rental yield uses a year of rent only. Cap rate uses operating income and ignores the mortgage. This page includes the sale.
Assumptions
- Net rent is what you collected after the operating costs you already subtracted.
- Selling and owning costs are the extra amount you type.
Worked example
A $300,000 purchase sold for $360,000, with $20,000 of net rent and $10,000 of costs, returns 23.33%.
Input definitions
- Net rent collected
- Rent you kept over the whole holding period. Zero is allowed.
- Selling and owning costs
- Costs not already removed from net rent. Zero is allowed.
Limitations
This is an estimate, not a loan offer, tax filing, or investment advice. The currency control changes the symbol only.
Questions
Is the mortgage included?
No. The purchase price is the divisor, not the cash you invested.
Can ROI be negative?
Yes, if the sale and rent do not cover the purchase and the costs.