ROI for rental property is key for landlords in 2025. At LeaseRunner, we know smart investors want to grow their profits and avoid losses. But what counts as a good ROI? How do you boost your rental returns, and how can you check your property’s rental return rate?
We’ll cover the ROI formula for rental property, explain what a good return on rental property is, and give you tips to raise your average ROI on rental property. Learning how to calculate ROI on rental property will help you reach your goals and get more from every investment.
What Is ROI in Real Estate?
Let’s start simple. ROI means “return on investment.” In real estate, ROI tells you how much profit your rental makes compared to what you spent. If your costs are low and your income is high, your ROI for investment property rises.
On the other hand, high costs or lost rent bring your ROI down. Landlords use ROI to compare deals or check how one property does against another.
The ROI for rental property is a tool. With it, you can spot good deals, poor investments, or areas for growth. Measuring ROI also helps you judge if your rental returns meet your needs.
How to Calculate ROI on a Rental Property?
ROI seems tricky, but the method is simple. Learning how to calculate ROI on rental property lets landlords see the true value of an investment.
Basic ROI Formula
Here’s the main ROI formula for rental property:
ROI = (Net Profit ÷ Total Investment) × 100
- Net profit: What’s left from rent after you pay for taxes, repairs, fees, mortgage, insurance, and vacancy losses.
- Total investment: Down payment, closing costs, repairs, and any cash you spent getting the unit ready.
Suppose you paid $200,000 up front, and your profit (after costs) is $14,000 a year. Plug it into the formula: 14,000 ÷ 200,000 = 0.07 or 7% ROI. This 7% figure is your honest rental return rate for that property.
What Factors Affect ROI?
Many things can push your ROI for rental property up or down. Location is huge; the city, school zone, and condition all affect demand. Property type matters too: some rentals need more repairs or get higher rent.
Big costs, like taxes, maintenance, insurance, and repairs, chip away at ROI. Local trends and rules—like new rental laws or limits—may change your income or expenses.
Don’t forget appreciation. If values rise, future ROI can go up, too. But high vacancy hurts returns fast. Keep your property cash flow strong with tips from our rental property cash flow post.
What Is Considered a Good ROI in 2025?
So, what is a good return on rental property now? In 2025, many experts say a good ROI for rental property is 8-12%. The average ROI on a rental property is often about 6-8%. In riskier or fast-growing markets, some investors seek even more.
Remember—safer deals often bring smaller rental returns, while risky or “fixer” homes might show a high rental return rate but with more work.
What Is a Good ROI for Rental Property in 2025?
Now, let’s get into the details. What’s “good” for ROI in 2025—and how can you tell if a property’s returns are strong?
What Is Considered a Good ROI in General?
A good ROI for investment property means you earn back your money and make a true profit. Usually, an average ROI on rental property of about 6-7% is common in safe areas. Above 8% is better, especially if costs are steady. Over 12% is great, but check for hidden problems.
Returns below 5% could be a warning. Maybe costs are too high, or rent is too low.
What is Considered a Good ROI by Rental Type?
The type of rental matters. Let’s break it down:
- Single-family homes: ROI for rental property here is often 6-8%. Rent is steady, but you can only rent to one tenant at a time.
- Multifamily buildings: These may get you 7-12% ROI. More tenants, more rent, but also more management and repairs.
- Short-term rentals (like Airbnb): Can bring 8-15% rental return rates if the area is in demand. But costs, rules, and empty periods can add risk.
- Long-term rentals: Typical ROI sits at 6-9%. Less effort than short-term, but the rent may be capped.
- Government-Assisted (Section 8): Safer returns of 5-8% are common. Rent is paid by the government, but sometimes the limits are strict.
Before you invest, do the math for each type. You can easily calculate the return on investment for rental property using your own numbers, or ask our team for tips.
How to Boost Your ROI as a Landlord?
You want a better ROI for investment property? Here’s what gives your rental returns a lift.
Screen Tenants with Credit Checks
Getting the right tenant is half the battle. Use strong screening and run full credit checks to make sure tenants pay on time. This lowers your risk of late payments, damage, or missed rent. Try the LeaseRunner credit check service to find solid tenants fast and keep your ROI for rental property strong.
Reduce Turnover & Improve Property Management
Every empty week lowers your rental return rate. Work to keep tenants happy so they stay. Answer requests fast. Upgrade old features to keep your place rent-ready. Good management helps you raise rent, keep occupancy high, and spend less on costly turnovers.
If you own several units, using a management company might net you a higher ROI. Or, read our rental property cash flow advice for more ideas. Keeping reliable tenants, minimizing repairs, and setting the right market rents can help your ROI for rental property rise every year.
Final Thoughts
The ROI for rental property is the most important number for every landlord in 2025. If you know the average ROI on rental property, what is a good return on rental property, and how to calculate ROI on rental property, you will make smarter choices every time.
The best investors use facts, not luck, and LeaseRunner stands behind you with tools and support. Use the ROI formula for rental property, compare types, and always keep growing your rental returns. Your road to better profits is waiting!
FAQs
1. How do I calculate ROI for a rental property?
Subtract your costs from total rent, then divide that net profit by the full amount you spent to own the property. Multiply by 100 for a percent.
2. What is a good return on rental property in 2025?
A good ROI on rental property is usually 8-12%. Over 12% is strong. Under 6% could mean it’s not worth it unless it’s very safe.
3. Does property type affect ROI?
Yes. Single-family homes may average 6-8%, multifamily up to 12%, and short-term rentals even more if demand is strong.
4. Should I buy government-assisted (Section 8) rentals to raise ROI?
Section 8 can bring steady rental returns (5-8%). You trade a bit of ROI for stable, on-time government payments.
5. What raises the average ROI on rental property?
Screen tenants well, keep costs down, reduce empty months, and price rent right for your market.
6. What does LeaseRunner do to help landlord ROI?
Our tools help run credit checks, process rent, and manage paperwork. This lets you grow ROI for rental property—while saving time and money.
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