Return on Investment (ROI)
Return on Investment is a commonly used financial metric uses to evaluate financial investments and decisions.
ROI compares investments gains with investment costs. Investment property gains are composed of several factors listed below. The higher a ROI the better results for an investment.
ROI is calculated by dividing the profit from an investment less the amount invested by the amount of funds invested.
There are several factors involved in determining the return on investment property. They are:
- Net Cash flow: The money generated by a property after paying all costs and debts from income.
- Tax benefits: Investors use depreciation to shelter sources of income.
- Equity Buildup: The equity buildup from paying off debt over time is another factor.
- Appreciation: Wealth has been created by buying property and selling it years later at a price. Wealth in families and estates have been created through this process.
By analyzing all of the factors involved in generating the return on investment property, one can understand the total return, timing and sources of cash flow from investment property.
The Zinner Real estate advisors can help you understand an investment property ROI and advice on how to improve it.