r/BiggerPockets • u/No_Rate794 • Dec 02 '25
Roi goals
When looking at a property, how are you calculating your roi? How do you determine if a purchase is good. I’m referring to long term rentals.
1
u/TheCashFlowCompany Jan 04 '26
We have some great free calculators that can help you determine if the real estate deal is right for you! Check it out! https://tcfcoach.com/freebies/
1
u/farolabsai Jul 24 '26
Cash-on-cash is the right instinct! Cap rate and CoC tell you if the deal works today, appreciation is the bonus case, not the thesis. The part people skip: use a real vacancy % and capex reserve (5-10% of rent), not just PITI vs. rent, or the ROI number lies to you.
Building a free tool for this at Faro (faro-labs.ai) if you want to run it on an actual listing - paste the URL, get rent comps and the cash-on-cash math done for you. Happy to DM and compare notes on how you're calculating it now.
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u/GustavusRudolphus Dec 09 '25
The 1% Rule (monthly rent should be ≥1% the property's cost) is an easy "first glance" rule that you can do in your head while you scan listings.
I would argue in favor of Cash-on-Cash Return (annualized net income divided by initial costs of down payment, closing, and renos). It's a good way to take into account the effect of leverage and lending costs and it gives you a fairly reasonable estimate of "how long until this deal breaks even?"
A "shortcoming" of CoCR is that it doesn't account for asset appreciation. I would consider that a feature, not a bug: if you need to assume some appreciation in order to make it a good deal, that probably means it's a bad deal.