If I buy a rental property with $100,000 in equity and every year it appreciates $5,000, has a net income of $5,000 and has principal paydown of $5,000, how would I calculate my ROI at the end of year 1?
The appreciation and principal paydown increase the amount of money I have invested in the asset. So should the ROI formula therefore be: $15,000/$110,000? Because the new amount of equity is $110,000? Or should that only be for the net income ($5,000/$110,000) & ($10,000/$100,000) and then combine the two results?
I'm confused about what should be considered the new amount invested in the asset at the end of each year so that I can accurately calculate ROI. Thank you very much for any help.