By Greg Johnson
We’ve been in real estate for many years, and one thing we’ve learned about rental properties is that the numbers matter just as much as the property itself. It’s easy to get caught up in how a house or duplex looks and imagine it will make a great investment, but the return on investment, or ROI, is what truly counts, and it’s the piece that decides whether the property will help you build wealth or become a burden. ROI simply means how much income the property brings in compared to what it costs you to own, and while that sounds straightforward, it can get complicated fast, which is why a good realtor can make all the difference by helping you plan ahead.
What ROI on a Rental Property Really Means
ROI might sound like a technical term, but it’s really just a way to measure whether a rental property is profitable or not. You take the costs of owning it, such as the mortgage, taxes, insurance, and ongoing maintenance, and then you compare them to the income from rent. If the income is greater, you’ve got a positive ROI, but if the costs eat up more than the rent, then you’re looking at a negative ROI. A realtor can sit down with you, go through those numbers, and make sure you see the true picture, and that can save you from making a decision based only on the asking price or a rough guess.
The Role of Rental Income
Rental income is the foundation of ROI, and it’s where experience and local knowledge really matter. We’ve seen plenty of properties where the rent was well below the market rate, and on paper it looked like the investment wouldn’t work, yet with time and the right plan it turned into a steady performer. A realtor understands what comparable rentals in the area are charging, and they know when there’s room to bring rents up over the years, which can completely change the outlook. They also know the rules about how quickly rents can be raised and what limits apply, so they’ll give you a realistic view of what’s possible rather than just handing you a hopeful number.
Thinking Long Term
When we bought our first rental property decades ago, the numbers in the early years didn’t impress anyone, and there were times when it looked like the expenses were just too high. What we found, though, was that the mortgage payment stayed the same while rents and property values slowly increased, and over time the math started to work in our favor. That’s how most rental properties work, and it’s why long term thinking matters so much. A realtor who’s been through market cycles can help you see past the first year, which often looks tight, and keep you focused on the fact that appreciation and rent growth tend to turn properties profitable as the years go by.
Why Realtors Talk About Cap Rates
Another tool that helps with ROI planning is the capitalization rate, or cap rate, and it’s one we use all the time. A cap rate compares the income of a property to its purchase price, but too often people miscalculate it because they leave out certain expenses, and that mistake makes a property look better on paper than it really is. A realtor knows how to calculate the cap rate properly, and that helps you decide what a property is truly worth. We’ve looked at properties listed for $250,000 that only made sense at $225,000 once the real expenses were included, and that kind of difference is important because it can be the line between a property that cash flows and one that drains your account month after month.
The Value of Local Knowledge
ROI doesn’t just depend on math, because location and demand play a huge role in whether a property performs well. Around Roseburg and Douglas County, we know which neighborhoods renters prefer, and we’ve watched how certain areas appreciate faster than others. That knowledge doesn’t come from a spreadsheet, it comes from years of working with buyers, sellers, and tenants in the same community. A local realtor can give you that perspective, which means you’re not just buying based on what the property looks like today, but also on where it’s likely headed in the next five or ten years.
Final Word
At the end of the day, a rental property is more than just another piece of real estate, because it’s also an investment that can build wealth if you plan carefully and buy wisely. The key is to understand ROI from the start, and that means looking closely at rental income, expenses, appreciation, and cap rates instead of just focusing on the listing price. A realtor helps you see the full picture, asks the questions you might not think of, and makes sure you’re buying an opportunity rather than just buying a building. After fifty years in this business, we can tell you that the investors who plan for ROI are the ones who end up with properties that succeed, while the ones who skip that step are the ones who struggle.
