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Return on Investment illustration

Real Estate · Return

Return on Investment

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Use ROI to express total profit relative to the cost basis of an investment.

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Interactive workbench

Simple profit return

ProfitInvestment Cost

$50,000 profit on $250,000 cost equals a 20% ROI.

Step 1 of 3

Variables and units

  • Profit

    Profit generated by the investment.

    currency

  • Investment Cost

    Total cost of the investment.

    currency

Common mistakes

  • Confusing ROI with annualized return.
  • Using revenue instead of profit.

Step-by-step example

Simple profit return

  1. 1. Start with the example inputs

    • Profit$50,000
    • Investment Cost$250,000

  2. 2. Apply the formula

    ProfitInvestment Cost

  3. 3. Run the numbers

    20%

    $50,000 profit on $250,000 cost equals a 20% ROI.

What this result means

An ROI of 20% expresses total profit as a share of what was invested. It ignores how long the money was committed, so a high ROI over many years can be weaker than a modest ROI achieved quickly — pair it with a time-aware measure like CAGR when holding periods differ.