How to Calculate ROI on Rental Property

How to Calculate ROI on Rental Property

  1. Calculate your annual rental income.
  2. Subtract your expenses from your annual rental income. This is your cash flow.
  3. Add your equity build to your cash flow. This is your net income.
  4. Divide your net income by your total investment to get your rental property return on investment.

  • Example 1:  A $40.00 profit off a $500.00 investment would give you a 8% ROI

  • Example 2: If your "all in cost" for a property is $425,000 and you sell at $500,000 that means your profit would be $75,000. Now you divide your profit (75k) by the all in cost (425k), and now you would have a 17.6% ROI!


Foreclosure Home Inspection Checklist

When you are considering buying a foreclosed property, there are extra precautions you must take in several key areas. This quick checklist will get you started on the due diligence that every property purchase needs.

      " There is money to be made in foreclosures, but you should know what you are getting into ahead of time and choose your property carefully. Don’t overlook the fundamentals that make a property desirable just because the purchase price is a bargain. Also, research financing options for foreclosed homes extensively. – Investopedia

There are several key areas that can derail a foreclosure property purchase

The Condition of a Foreclosed Property

  • Since owners in default on their mortgage often neglect basic maintenance, it’s even more important that a thorough inspection is done in the places that most owners don’t attend to. Inspect the attic, the crawlspace, the mechanicals including the heat and air systems, the water heater and do a thorough inspection of the exterior. The roof, facsia, soffits, chimneys and exterior plumbing all need to be looked over. Don’t neglect a careful once over of the grounds. Many a problem can lie in that overgrown yard.
  • Vandals and squatters may have taken up residence in the property. Often the previous owner leaves personal belongings behind. Be sure to account for any additional debris removal and clean-up expenses when calculating your offer.

The Legal Issues When Purchasing a Foreclosure

  • Foreclosure properties should have a clean title. Verify this by having your title agent complete a title search to make sure there no encumbrances or ownership issues that could become a hassle.
  • Traditional financing can be an issue if the property is in need of significant repairs. Many foreclosures are purchased using private money lenders like those found at

When you can find a great deals on foreclosures, it’s possible to become a high-volume wholesaler or fix and flip investors – or even build a rental property empire. Every purchase deserves careful due diligence to mitigate risk, project profits and ensure success.