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Investor tools

Renovation ROI

A renovation pays back two ways: higher rent and a higher value. This tool counts the full cost, including contingency and the rent you lose while the work is done, and shows each return separately so one optimistic number cannot hide a weak one.

The figures shown are example values. Replace them with your own; rates, taxes and insurance vary by lender, property and municipality.

Every input is tagged with where it comes from

  • Source: Actuala figure from a document such as a price sheet, lease, tax bill or lender quote.
  • Source: Assumptiona choice or judgment you make, such as down payment, vacancy or how long you hold.
  • Source: Estimatean estimate of a cost or value, such as insurance, comparable rents or value after renovation.

Results are calculated from these inputs. They are estimates, not quotes, appraisals or advice.

The work
Source: Actual
$

From contractor bids

Source: Assumption
% of cost

Older homes often need more

Source: Assumption
months
Rent
Source: Actual
$

Enter 0 for a vacant or owner-occupied home

Source: Estimate
$

From comparable renovated rentals

Source: Assumption
%
Source: Estimate
$

Higher taxes or insurance after the work

Value
Source: Estimate
$
Source: Estimate
$

From recent comparable sales, not a hope

Return on cost (added income)

9.3%

Total cost, with contingency and lost rent
$50,000
Added net income (yearly)
$4,650
Payback from added income
10.8 years
Value added
$45,000
Equity created
−$5,000
Cost recouped in value
97.8%

The value after renovation is an estimate. An appraisal or comparable sales decide it; renovations rarely add exactly what they cost.

How this is calculated
Budget with contingencyRenovation cost × (1 + contingency %)
$46,000
Rent lost during the workCurrent rent × months off the market
$4,000
Total costBudget with contingency + rent lost
$50,000
Added net income (yearly)(Rent after − current rent) × 12 × (1 − vacancy %) − added expenses × 12
$4,650
Return on cost (income)Added net income ÷ total cost
9.3%
Value addedValue after − current value
$45,000
Equity createdValue added − total cost
−$5,000
Excludes financing costs and income taxes. Return on cost compares a year of added income with the full cost; cost recouped compares the value added with the budget.

The link holds only the figures in this tool, in the web address. Nothing is saved on our servers, and no name or contact details are included. See our privacy policy.

Estimates for information only, not loan offers, appraisals or tax advice. Every input is checked against a stated range, and the formulas are shown under “How this is calculated”. More tools: all investor tools.

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