Real Estate ROI Calculator
Model a full hold period — rent growth, amortisation, sale price and selling costs — then convert total ROI into the annualised figure that can actually be compared.
Real Estate ROI Calculator
Results recalculate instantly on every keystroke. Nothing you type is transmitted.
What this result does not account for
- Deterministic constant-growth model; real markets are neither constant nor smooth.
- Treats cash flow as received at the end of the hold, so it is not an IRR.
- Pre-tax, and excludes any refinancing during the hold.
In short: Total ROI is profit over cash invested across the whole hold; the annualised figure is what compounds to it. A 71.63% total return over five years is 11.41% a year, not 14.33% — dividing by the years overstates it every time.
Formula
total ROI = (cumulative cash flow + net sale proceeds − invested) ÷ invested
annualised = (1 + total ROI)1/years − 1
[('cumulative cash flow', "each year's cash flow, with NOI growth"), ('net sale proceeds', 'sale price less selling costs and loan balance'), ('total ROI', 'the whole-hold return, cumulative'), ('annualised', 'the compound rate that produces it')]
Worked Example
- Project NOI forward at the growth rate for each year of the hold.
- Subtract debt service and capital spending to get each year's cash flow, and total them.
- Grow the price at the appreciation rate to the sale date.
- Deduct selling costs and the outstanding loan balance for net proceeds.
- Divide total profit by cash invested, then take the appropriate root to annualise — never divide by the years.
294,000 invested in a 1,050,000 property held five years, with NOI growing 2% and the price growing 3%, produces 109,736.20 of cumulative cash flow. The sale at 1,217,237.78 less 85,206.64 of selling costs and a 737,186.45 loan balance nets 394,844.69. Total profit is 210,580.89, a 71.63% total ROI — which is 11.41% a year, not the 14.33% that dividing by five would suggest. Selling costs alone consumed 50.95% of the price gain.
Strengths & Limits Of This Model
Where this engine is strong
- Annualises correctly instead of dividing by the years
- Quantifies selling costs as a share of the price gain
- Refuses an annualised rate when the loss exceeds capital
Where it stops
- Not an IRR
- Constant-growth assumptions
- Pre-tax
Practical Use Cases
Comparing a hold against other assets
Producing an annualised figure that can sit beside an equity return.
Testing hold length
Seeing how selling costs amortise over longer periods.
Stress-testing appreciation
Re-running with growth at zero to see what income alone delivers.
Reporting to partners
Quoting total and annualised returns side by side without conflating them.
Deciding whether to sell
Weighing the transaction cost of exiting against continued holding.
Methodology & Editorial Standards
Cash flow is projected year by year with NOI compounding at the growth rate, then summed; it is not annuitised, because that would obscure the growth assumption. The sale price compounds at the appreciation rate over the hold. Annualisation takes the hold-length root of one plus total ROI, which is the only correct conversion. Where the loss exceeds invested capital the page refuses to print an annualised rate rather than returning a complex or misleading value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Real Estate ROI Calculator — 10 Expert FAQs
10 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Why can't I just divide total ROI by the number of years?
Because returns compound. A 71.63% total return over five years is 11.41% annually, not 14.33%, since each year's gain earns in the years that follow. Dividing always overstates, and the error widens as the hold lengthens and the return grows. It is the single most common misquotation in property returns.
What is the difference between ROI and IRR?
This calculation treats cash flow as a lump sum at the end of the hold. IRR discounts each year's cash to the present and solves for the rate that sets net present value to zero, so it properly rewards cash received early. IRR is the more rigorous measure; annualised ROI is easier to explain and adequate when cash flows are fairly even.
Should selling costs be included?
Always. At typical commission rates plus closing costs they run six to eight per cent of the sale price, which on a medium hold is roughly half the appreciation. Omitting them is the most common reason a modelled return fails to appear in the bank account.
How do I choose an appreciation rate?
Conservatively, and then test zero. Long-run housing appreciation has broadly tracked inflation plus a small margin, so a rate well above that is a market call rather than an assumption. If the deal only works at four per cent growth, you are forecasting the market rather than underwriting the asset.
Does this include tax?
No. Capital gains treatment, depreciation recapture and any exchange or deferral provisions materially affect the after-tax result and depend entirely on your jurisdiction and structure. Model the pre-tax return here and take the tax question to an adviser.
What loan balance should I enter at sale?
The scheduled balance after the hold period, which the amortisation schedule gives. On a thirty-year loan held five years, expect to have repaid only around six per cent of the original balance — early payments are overwhelmingly interest.
Is a higher total ROI always better?
No, because it says nothing about time. A 60% return over three years beats a 70% return over six. That is exactly why the annualised figure exists, and why any comparison between deals with different holds must use it.
What if I lose money?
Total ROI simply goes negative. The annualised figure can still be computed for a partial loss, but if the loss exceeds the capital invested there is no positive multiple to take a root of and no meaningful annual rate exists. This page says so rather than printing a misleading number.
Should I model rent growth?
Yes, but modestly. Two to three per cent is a defensible long-run assumption in a stable market. Aggressive rent growth compounds through the whole model and can double a projected return on paper without any change to the actual asset.
How does hold length affect the return?
Longer holds amortise the transaction costs over more years, which usually raises the annualised return, and they allow more principal to be repaid. Against that, capital expenditure accumulates and the asset ages. The costs of buying and selling are what make very short holds hard to justify.