Return On Investment (ROI) Calculator
So you’ve got yourself a nice little nest egg or else access to a sympathetic bank manager and you’re thinking about buying into real estate but, quite rightly, wanna know what kind of bottom line to expect before jumping in. Or perhaps you’re a seasoned investment pro with a respectable portfolio and need to keep tabs on how each of your property assets is performing. No matter which, our handy and easy-to-use ROI Calculator will give you the predicted annual return on your existing or would-be investment in seconds!
❶ Start by selecting your preferred currency – choose from whichever of U.S. dollars, Euros, Thai baht or British pounds.
❷ Next, set the PURCHASE COSTS of the property by moving each slider left/right or by keying in the exact amounts – the original asking price as well as all other upfront costs such as the conveyance (transfer of ownership) fee and, if necessary, an outlay for initial renovation work.
❸ Then, specify the INCOME earned from the property – the amount (estimated or actual) and frequency of rental income plus those of any other related takings.
❹ Lastly, plug in the ongoing EXPENSES associated with the property – the amount (estimated or actual) and frequency of the fee for using a rental management service and the same for building fees (like maintenance charges or contribution to a sinking fund), homeowner insurance, mortgage payments, utility bills and all other associated overheads.
And, hey presto, your forecasted Return On Investment will appear before your very eyes! And if you tweak any of the different variables, the ROI percentage will update instantly!
But what does it all mean? Well, Return On Investment is a hugely popular and widely used measure of the profitability of an investment and, as it happens, can be applied to absolutely anything that has a cost from which potential gains can be gotten. For real estate investments in particular, countless factors affect the ROI not least the property type and location so it’s important to keep in mind that, even after inputting costs, income and expenses which are bang on and conservative (so budgeting for possible vacancy rates and unexpected repairs, for example), the Return On Investment figure is a snapshot so shouldn’t be taken as gospel.
All the same, ROI is still a solid baseline upon which to make an informed financial decision when sizing up whether it’s worth investing in a particular property or otherwise as a nifty yardstick by which to gauge the performance of an existing real estate asset. Alas, though, there’s no one size fits all answer when it comes to what’s a good Return On Investment but as a rough guide, a yield of under 5% and chances are that it’d be unwise to take on the property if the end-game is purely to profit from the investment; returns of 5% to 10%, on the other hand, and you’ll likely reap a decent bang for your buck while anything over that and you’ll surely be laughing all the way to the bank!