Return on investment (ROI) is a measure of the profit or loss made on an investment, expressed as a percentage of the initial investment. It is used to evaluate the efficiency of an investment or compare the profitability of different investments.

In real estate, return on investment (ROI) can be used to evaluate the profitability of a property or a portfolio of properties. There are several different ways to calculate ROI in real estate, and the specific method used will depend on the type of investment and the individual investor's goals and objectives.

One common method for calculating ROI in real estate is the capitalization rate (cap rate), which is used to estimate the potential return on an investment property based on the income it generates. The cap rate is calculated by dividing the property's net operating income (NOI) by its purchase price or current market value. For example, if a property has an NOI of $50,000 and a purchase price of $500,000, its cap rate would be 10% (50,000 / 500,000).

Another way to calculate ROI in real estate is to use the cash on cash return, which is the annual return on an investment property based on the cash invested in the property. The cash on cash return is calculated by dividing the annual cash flow (rental income minus expenses) by the cash invested in the property. For example, if an investor invested $100,000 in a property and received $10,000 in annual cash flow, their cash on cash return would be 10% (10,000 / 100,000).

It's important to note that these are just two examples of ways to calculate ROI in real estate and there are many other methods that can be used depending on the specific circumstances of the investment.