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Updated about 5 years ago on . Most recent reply

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Leslie Hsia
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8
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Factoring Inflation when Assessing Rental Property ROI

Leslie Hsia
Posted

Hi everyone! Completely new potential rental property investor here.

I've done some reading on understanding how to calculate rental property ROI. According to Brandon Turner's Rental Property Investing book (as well as other articles I've seen online), part of the ROI calculation involves understanding your total investment amount, where the total investment amounts includes the following: down payment, closing costs, and pre-rent holding costs (mortgage, insurance, repairs, etc.).

When calculating the overall return on a rental property investment upon selling, do you adjust your total investment amount for inflation? (ie. If I were to make a rental property purchase in 2020 and sell in 2040, would I adjust my total investment amount to the 2040 value?) I ask because I never/hear see this discussed in calculations for overall ROI, but I think that it's something that would really affect what your true gains are. Is there something that I'm missing here?

Thanks in advance!

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