ROI Calculator

ROI stands for Return on Investment. It is a widely used financial metric that measures the profitability of an investment relative to its cost. A positive ROI means you earned more than you spent, while a negative ROI indicates a loss.

ROI is calculated using the formula: ROI = ((Final Value − Initial Investment) / Initial Investment) × 100. For example, if you invested $1,000 and it grew to $2,000, your ROI would be 100%.

Annualized ROI adjusts your total ROI to reflect what you earned per year on average, accounting for the length of the investment. It allows fair comparison between investments held for different time periods. The formula is: Annualized ROI = ((1 + ROI)^(1/years) − 1) × 100.

For real estate, your initial investment is typically your purchase price (plus costs), and the final value is the sale price (or current market value) plus any rental income earned. Plug those numbers into the calculator along with the number of years held to get your ROI and annualized ROI.

A 30% ROI means you earned 30 cents for every dollar you invested. So if you invested $1,000, you would have gained $300, ending with $1,300. Whether that's a good result depends on the time period and the type of investment.

The ROI would be ($1,200 / $2,000) × 100 = 60%. This means you earned 60% of your original investment back as profit.

ROI (Return on Investment) measures the gain relative to the total cost of the investment, including any borrowed funds. ROE (Return on Equity) measures the gain relative only to the equity (your own money) you put in. ROI gives a broader picture, while ROE focuses on the owner's contribution.

ROI does not account for the time value of money, inflation, taxes, or risk. Two investments with identical ROIs can be very different in quality if one took 2 years and the other took 20. Using annualized ROI and considering other metrics helps paint a fuller picture.