Calculating ROI on rental propety?

[Kyle Rowe]

What method do you guys use for calculating ROI on rental property? I've been searching around but, almost every method gives me a different rate of return and some use future sales of the property in the equation which in my opinion is not a factor at my age. Along with the method, what is an ideal ROI? And does that factor in for inflation, etc? Is there a rule of thumb as far as making X % more than commercial interest rates?

Thanks all!

[Bryan L.]

I think that ROE is more important than ROI (E is for equity). Say you bought a house at $100,000 with 20% down. Now assume that with appreciation and loan pay-off you now have $50,000 in equity. You could sell and take that $50,000 and invest in anything you want to - stocks, cds, bonds, another/different rental, or whatever. So, IMHO, equity is the metric, not investment. Another reason to look at equity instead of investment is that it's very possible to have a property in which you have no out-of-pocket investment.