How to Calculate ROI on Farm Land

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Calculating ROI helps you make smarter investments.
Calculating ROI helps you make smarter investments. (Image: Jupiterimages/BananaStock/Getty Images)

If you purchase farm land as an investment, you should calculate your return on investment (ROI) in order to see if it was a good or bad investment. If the return on investment is high, then you may consider investing in more farm land. However, if you have a low return on investment, then you may consider finding other investments that yield a higher return for you. This is a method of money allocation that gives more money to higher returns.

Add together all gains from the farm land. For example, assume you had profits of $50,000 and $40,000 then sold the land for $100,000. Total gains equal $50,000 plus $40,000 plus $100,000 for a final total of $190,000.

Subtract the cost of the farm land from the gains. In the example, $190,000 minus $100,000 equals $90,000. This is the actual gain on the land.

Divide the actual gain on the land by the initial land cost. In the example, $90,000 divided by $100,000 equals 0.9 or 90 percent for an ROI.

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