ROE Calculator
A Free Return on Equity (ROE) Calculator for Real Estate Investors
Is your investment property working as hard as it should? Or are you unsure how much equity to leave in your next rental property? Use our free Return on Equity (ROE) calculator to help you find out.
Why return on equity is important to understand
When you buy a property, your true return isn’t just about the rental yield or capital growth. It’s about how effectively your equity — the portion you actually own — is generating returns.
Banks, developers and expert investors use ROE to assess whether they’re making the best use of their capital. As property values rise and your equity grows, your ROE can actually fall unless you’re reinvesting or leveraging strategically.
Keeping an eye on ROE ensures you’re not leaving money stagnant in bricks and mortar when it could be working harder elsewhere. There are not just countless investments your capital could be poured into — but countless ratios of equity-to-debt that you might have available to you to provide the best return for your financial position.
How ROE differs from ROI
It’s easy to confuse Return on Equity (ROE) with Return on Investment (ROI). The key difference is what’s being measured:
- ROI looks at the total return compared with the overall purchase price or investment outlay.
- ROE narrows in on your equity — the funds you’ve personally tied up after accounting for loans and liabilities.
In real estate, ROI might look strong on paper, but ROE gives a sharper picture of how efficiently your capital is being put to use.
How is ROE measured?
The formula is straightforward:
ROE = Net Profit ÷ Equity × 100
- Net Profit: Your rental income minus expenses like rates, management fees, insurance and maintenance.
- Equity: The current property value minus the loan balance.
For example, if you earn $20,000 net income on a property where you have $200,000 in equity, your ROE is 10 per cent.
When to use ROE?
You’ll want to check your ROE at a few key points, like when you’re looking over how your portfolio is performing, thinking about refinancing or pulling out equity for the next investment, weighing up different options such as commercial property, residential units or even shares, or simply working out if it’s time to upgrade, renovate or sell.
Tracking ROE regularly keeps you aligned with your financial goals and helps ensure your capital isn’t being underutilised.
Use our Free ROE Calculator
Use the calculator below to quickly estimate your property’s return on equity. Just input your property value, loan balance and annual net income.