A tool designed to estimate the profitability of a rental property, this resource uses annual net operating income and market value to determine a percentage representing potential return on investment. For example, a property generating $10,000 in annual net operating income and valued at $100,000 would yield a 10% rate.
This percentage provides investors with a valuable metric for quickly comparing different investment opportunities and assessing potential risks and rewards. Historically, this metric has served as a crucial element in real estate investment analysis, enabling informed decision-making and contributing to more efficient market dynamics.