math
rate of return
Rate of return is the profit or income from an investment expressed as a percentage of the amount invested. A simple form is annual net income or gain divided by the investment, times 100. In real estate, related measures include the capitalization rate (NOI divided by value) and cash-on-cash return (annual cash flow divided by cash invested). Higher risk generally demands a higher expected return.
- Exam tip
- Use the formula Income = Rate × Value (or Investment). Identify which number is missing and solve for it, as in cap rate problems.
- Example
- An investor pays $200,000 for a property that produces $16,000 in annual net income. The rate of return is $16,000 ÷ $200,000 = 8%.
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Last verified: 2026-10-23