How to Calculate Marginal Cost

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Real Estate ROI Calculator

Total Investment Cost: $0.00
Total Expenses (Incl. Holding): $0.00
Net Profit: $0.00
Return on Investment (ROI): 0.00%
Annualized ROI: 0.00%
function calculateRealEstateROI() { var purchase = parseFloat(document.getElementById('purchasePrice').value) || 0; var buyClosing = parseFloat(document.getElementById('closingCosts').value) || 0; var reno = parseFloat(document.getElementById('renoCosts').value) || 0; var carrying = parseFloat(document.getElementById('carryingCosts').value) || 0; var months = parseFloat(document.getElementById('holdPeriod').value) || 0; var resale = parseFloat(document.getElementById('sellingPrice').value) || 0; var sellFeePercent = parseFloat(document.getElementById('sellingFees').value) || 0; if (purchase <= 0 || resale 0) { annualizedROI = roi / (months / 12); } document.getElementById('resTotalInv').innerText = "$" + totalInvestment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resTotalExp').innerText = "$" + totalAllCosts.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resProfit').innerText = "$" + netProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resROI').innerText = roi.toFixed(2) + "%"; document.getElementById('resAnnualROI').innerText = annualizedROI.toFixed(2) + "%"; document.getElementById('roi-result').style.display = 'block'; }

Understanding Real Estate ROI (Return on Investment)

Return on Investment (ROI) is one of the most critical metrics for any real estate investor. Whether you are "fix-and-flipping" houses or analyzing a potential rental property, knowing your ROI helps you determine if the financial risk is worth the potential reward.

How to Calculate Real Estate ROI

The basic formula for ROI is: (Net Profit / Total Cost of Investment) x 100. However, in real estate, the "cost" isn't just the purchase price. To get an accurate figure, you must include:

  • Acquisition Costs: The purchase price plus closing costs (title insurance, inspections, legal fees).
  • Rehabilitation Costs: All money spent on repairs, materials, and labor.
  • Carrying Costs: Recurring expenses while you own the property, such as property taxes, insurance, utilities, and loan interest.
  • Selling Costs: Agent commissions, marketing, and transfer taxes.

Example Calculation

Imagine you buy a distressed property for $200,000. You spend $5,000 on closing and $40,000 on a full kitchen and bath remodel. Your total investment is $245,000.

During the 6 months it takes to renovate and sell, you pay $1,000 per month in utilities and taxes ($6,000 total). You sell the home for $320,000 and pay 6% in commissions ($19,200).

Your net profit is $320,000 – ($245,000 + $6,000 + $19,200) = $49,800. Your ROI would be ($49,800 / $245,000) = 20.3%.

What is a Good ROI in Real Estate?

A "good" ROI depends on the strategy. Fix-and-flip investors often look for a 15% to 20% ROI over a 6-month period. Long-term rental investors often focus more on "Cash-on-Cash Return," where 8% to 12% is considered strong. Always consider the Annualized ROI to compare investments that take different amounts of time to complete.

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