What's a good ROI on real estate?

Flips often target 15–25% ROI per project. Buy-and-hold total ROI over 5 years can exceed 100% with leverage and appreciation.

Not by default. Always specify time period or use annualized ROI when comparing.

ROI is total return over a period. IRR is annualized return accounting for the timing of cash flows. IRR is more accurate but harder to explain.

Should ROI include taxes?

For personal use, yes. For deal marketing, pre-tax is standard so partners can apply their own tax situations.

ROI Calculator

Return on investment is the simplest, most universally understood profitability metric. It answers 'for every dollar I put in, how many dollars did I get back on top?' — nothing more. This calculator gives you ROI instantly and explains where the metric helps and where it misleads.

Enter total investment and total profit to compute ROI — a simple yield-on-cost metric for any project.

What counts as investment

Include every dollar you actually put in: purchase price (if all-cash) or equity + carry, closing costs, rehab, holding costs (interest, taxes, insurance, utilities during the project), and selling costs. Anything financed with someone else's money isn't your investment.

What counts as profit

Profit is net proceeds minus total investment. For a flip: sale price − selling costs − loan payoff − total investment. For a rental hold: cumulative cash flow + net sale proceeds − total investment.

ROI's biggest weakness: time

A 30% ROI over 6 months is spectacular; the same 30% ROI over 5 years is mediocre. Always pair ROI with a time period, and prefer annualized ROI or IRR when comparing across projects.

When ROI beats other metrics

ROI is intuitive and easy to explain — good for pitching partners and lenders. It handles one-time capital events (flips, developments) better than cap rate or cash-on-cash, which assume steady income.

Annualizing ROI for real comparison

Annualized ROI converts a lump-sum return into a per-year rate, which is the only fair way to compare projects of different durations. The formula is (1 + ROI)^(1/years) − 1. A 40% ROI over 2 years annualizes to about 18.3% per year. A 40% ROI over 6 months annualizes to about 96% per year. The same headline number describes wildly different economics. When you evaluate a project, ask for the hold period along with the ROI; when you present a project, always show both. Serious LPs will compute annualized ROI in their heads regardless — showing it up front signals you understand what you're pitching.

ROI, IRR, and equity multiple together

Three metrics answer three different questions. ROI answers 'how much did I make on my money?' IRR answers 'what annualized rate did that return represent, accounting for the timing of cash flows?' Equity multiple answers 'how many times my invested capital did I get back?' A deal can look great on ROI, mediocre on IRR (because it took too long), and strong on equity multiple (because early distributions compounded). Presenting all three prevents any one metric from misleading. Institutional capital almost always underwrites to IRR and equity multiple; ROI is the retail investor's shorthand.

Worked Example

Example: You put $85,000 total into a flip (down payment, rehab, closing, holding). You net $32,000 profit after sale. ROI = 32,000 ÷ 85,000 = 37.6%. If it took 5 months, that's a very strong return. If it took 18 months, less so.

Common Mistakes

• Ignoring holding costs. • Comparing ROI without normalizing for time. • Confusing ROI with margin (profit ÷ revenue). • Treating financed dollars as your investment.

How It Works

Step 1 — ROI = (Total Profit ÷ Total Investment) × 100.
Step 2 — Profit is net after all costs (purchase, rehab, holding, selling).
Step 3 — ROI is time-agnostic — it doesn't tell you how long the return took.

Frequently Asked Questions

What's a good ROI on real estate?: Flips often target 15–25% ROI per project. Buy-and-hold total ROI over 5 years can exceed 100% with leverage and appreciation.
Is ROI annualized?: Not by default. Always specify time period or use annualized ROI when comparing.
ROI vs. IRR?: ROI is total return over a period. IRR is annualized return accounting for the timing of cash flows. IRR is more accurate but harder to explain.
Should ROI include taxes?: For personal use, yes. For deal marketing, pre-tax is standard so partners can apply their own tax situations.

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