Add up the full return, not just the rent check.

Total return on investment adds up everything the property gives you in a year, including cash flow, mortgage principal paydown, appreciation, and tax benefits, then divides that by the cash you invested. Looking only at cash flow understates the true return because it ignores equity and appreciation.

Rental real estate builds wealth through cash flow, loan paydown as tenants pay down your mortgage, appreciation in property value, and tax benefits such as depreciation. A property with thin monthly cash flow can still deliver a strong total return once the other three are counted.

Many investors are satisfied with a total return in the low double digits or higher once cash flow, equity paydown, appreciation, and tax benefits are combined, though it depends on risk and financing. Keep appreciation assumptions conservative, since optimistic growth numbers can make a weak deal look strong.

Yes, appreciation is a real part of total return, but it is the least predictable part. It is wise to underwrite a deal so it works on cash flow alone, then treat appreciation as upside rather than the reason to buy.