What is ROI on investment properties? One of the main reasons people invest is to increase their wealth. While motivations may differ between investors, some may want money for retirement and others may choose to sock it away for other life events. Making money is usually the basis of all investments. It doesn’t matter where you put your money, whether it goes into real estate or something else. Hi, I’m Rich Barnes, Owner/Broker of Realty Experts in West Allis, Wisconsin, 53214. Real estate is a tangible property that’s made up of land and generally includes structures that are found on that land. Investment properties are one example of real estate investments. They are purchased with the intent to make money through rental income. Some people buy investment properties with the intent to sell them after a short period of time, regardless of the intention for investors who diversify their investment portfolio within real estate, it’s important to measure the return on investment or ROI to determine the property’s profitability. Here’s a quick look at ROI and what it is, how to calculate it for your rental property, and why it’s important variable you should know before you make the purchase. To calculate the profit or gain on any investment, first take the total return on the investment, subtract the original cost of the investment. Since return on investment is a profitability ratio it gives us the profit on the investment, represented in percentage terms. Keep in mind that there is a number of variables that can come into play with real estate which can affect their return on investment numbers. These include repair and maintenance expenses, the amount of money borrowed, the interest rate to make the initial investment, and of course financing terms can greatly impact the overall cost of the investment. If you have any questions on real estate income properties, feel free to reach out. I’m here to help. Thanks and you have a great day.