Return on Investment (ROI)

Total return (including equity) as a percentage of total investment.

Definition

ROI captures the complete picture: cash flow + equity gain + appreciation. Unlike CoC (cash only), ROI includes the paper gains from equity creation and market appreciation. It's most useful for evaluating flips (where the entire return is realized at sale) and for comparing real estate returns to other asset classes like stocks.

Formula

ROI = (Total Return / Total Investment) × 100

Total Return = Cash Flow + Equity Gained + Appreciation
For flips: ROI = Profit / Total Cash Invested × 100

Related Terms

Cash-on-Cash Return (CoC)

Annual cash flow divided by total cash invested — your return on actual dollars deployed.

Equity

The difference between what a property is worth and what you owe on it.

Net Operating Income (NOI)

Gross income minus operating expenses, BEFORE debt service.

Educational content only. Consult a CPA or attorney for advice specific to your situation.