ROI Calculator

What is ROI?

Return on Investment (ROI) measures how much value an investment created relative to its cost, expressed as a percentage. It's one of the simplest and most widely used profitability metrics — applicable to stocks, real estate, a business purchase, or even a marketing campaign — because it reduces any investment down to a single, comparable number.

How ROI is calculated

Net Profit = Total Return − Total Cost, where Total Cost is your initial investment plus any additional costs, and Total Return is the final value plus any additional income received along the way. ROI% = (Net Profit ÷ Total Cost) × 100, which is the same percent-change formula the percentage calculator uses, with cost as the starting value. This calculator also reports the return as a multiple (e.g. "1.5x") and an annualized rate, which compounds the total return down to a per-year figure so investments held for different lengths of time can be compared fairly.

ROI on a rental property

For real estate, use the purchase price as your initial investment, and closing costs or renovation spend as additional costs. Total return should include both the sale price (or current value) as the final value and any rent collected during ownership as additional income — real estate ROI is usually driven by a mix of appreciation and rental cash flow, not appreciation alone.

Why annualized ROI matters

A 30% ROI sounds great — until you learn it took 10 years to get there. Annualized ROI compounds the total return down to a yearly rate (similar to CAGR), making it possible to fairly compare a quick flip against a long-term hold, or two investments with different timelines. As a rule of thumb, a longer holding period needs a much higher total ROI to match the same annualized rate as a shorter one: 10% a year compounds to about 21% total over 2 years but about 159% over 10 years.

The annualized figure is only shown when you enter a holding period above zero. With no time frame there is no per-year rate, so the card shows a dash rather than repeating the total ROI as if it were annual.

ROI vs. annualized ROI vs. IRR

These three measures answer different questions, and mixing them up is a common way to overstate a deal.

• ROI is the total gain over the whole holding period. It ignores time, so 50% over 3 years and 50% over 15 years look the same.
• Annualized ROI (CAGR-style) converts that total into a steady yearly rate: (total return ÷ total cost)^1/years − 1. It assumes one lump sum in and one lump sum out.
• IRR (internal rate of return) is the discount rate that sets the net present value of every dated cash flow to zero. It's the right tool when money goes in and comes out at different times, as with monthly rent, staged renovations, or extra contributions. This calculator doesn't compute IRR. It treats income as arriving in one lump, so its annualized figure is an approximation when cash flows are spread out.

Borrowed money changes the picture as well. If you financed the purchase, the cost of that debt belongs in your costs, and the APR calculator shows what a loan really costs once fees are included.

Cap rate and cash-on-cash return for rentals

Real estate investors usually look at two other ratios alongside ROI. Both are snapshots of a single year rather than a whole holding period:

• Cap rate = net operating income ÷ property value × 100. Net operating income is rent minus operating expenses (taxes, insurance, maintenance, management, vacancy), before any mortgage payments. Because it ignores financing, it lets you compare properties regardless of how they're paid for.
• Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested × 100. Cash flow here is after mortgage payments, and cash invested is your down payment, closing costs, and upfront repairs. It shows what your own money earns in a year with leverage included.

Neither one includes appreciation. The ROI above captures appreciation through the final value, so the three numbers work best side by side.

Marketing ROI and ROAS

Ad platforms report ROAS (return on ad spend): revenue ÷ ad spend, usually written as a ratio such as 4:1 or 400%. ROAS is not ROI. It compares revenue, not profit, with ad spend alone, so it leaves out product costs, fees, creative, and tooling. A 4:1 ROAS on a product with a 25% gross margin roughly breaks even: $400 of revenue yields $100 of gross profit against $100 of ad spend. To get a true marketing ROI, enter the full campaign cost as the investment and the gross profit (not revenue) from attributed sales as the final value. The margin calculator helps you turn revenue into gross profit first.