Buying rental property is an investment option that carries a higher risk than some other options. However, the returns can be good. Assume you have purchased a single-
family home that you intend to rent for $850 per month. You will have the following expenses:
Monthly mortgage $390
Monthly insurance $70
Semi annual property taxes $380
Repairs (yearly estimate) $500
Monthly lawn care or snow removal $125
The total yearly expenses for the rental property will be_____.00.

The ratio of net income to investment is known as return on investment (ROI). A high return on investment (ROI) indicates that the investment's benefits outweigh its cost.

ROI is a performance indicator that is used to assess an investment's effectiveness or to compare the efficiencies of several distinct investments.

First, find the amount earned per year:

= 850 x 12

= $10,200

The yearly expenses would be:

= (390 x 12) + (70 x 12) + (380 x 2) + 500 + (125 x 12)

= 4,680 + 840+ 760+ 500 + 1500

= $8280

The annual ROI is:

ROI= (10,200 - 8280) / 10,200 x 100%

ROI = 18.82%

Therefore the expenses involved in running the property, and the rental amount, the return on the investment would be 18.82%.

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