ROI on a fix-and-flip
Illustrative example only:
| Purchase | $300,000 |
|---|---|
| Renovation | $90,000 |
| Holding and financing | $20,000 |
| Selling costs | $30,000 |
| Sale price | $480,000 |
| Profit | $40,000 |
If all $440,000 of costs were paid in cash, ROI is about 9%. With financing, the cash invested is smaller and the percentage is higher, but so is the risk.
Rental returns
- Net operating income (NOI): rent minus operating expenses (taxes, insurance, repairs, management, vacancy), before the mortgage.
- Cap rate: NOI ÷ property value.
- Cash-on-cash return: yearly cash flow after the mortgage ÷ the cash you put in.
Texas specifics
Texas has no state income tax, but property tax rates are among the higher ones in the country, and they weigh heavily on rental returns. Always use the current tax bill and a real insurance quote, not estimates.
General information, not legal, tax or financial advice. Laws and figures change; check the specifics for your situation.
Frequently asked questions
What is a good ROI on a rental property?
There is no single number. It depends on risk, location, financing and your goals. Compare an investment with what the same money could earn elsewhere at similar risk.