Calculating return on investment (ROI) is crucial for real estate investors to evaluate property profitability. ROI, defined as the expected return as a percentage of the investment cost, allows for comparison between opportunities. The formula is ROI = (Investment Gain - Investment Cost) / Investment Cost. Investors may use the cost method or the out-of-pocket method, with the latter often showing higher returns due to leverage. A good ROI varies based on property type and market conditions, with benchmarks including stock market returns and capitalization rates.