Real Estate ROI & Cash Flow Calculator
Total Initial Investment:
$0.00
Annual Net Operating Income (NOI):
$0.00
Monthly Cash Flow:
$0.00
Annual ROI (Cash-on-Cash):
0.00%
Cap Rate:
0.00%
Understanding Real Estate Return on Investment (ROI)
Return on Investment (ROI) is the most critical metric for real estate investors. It measures the efficiency of an investment or compares the efficiencies of several different investments. In the context of rental properties, ROI tells you how much profit you are making relative to the total cost of the project.
Key Metrics Explained
- Total Investment: This includes the purchase price plus all "out-of-pocket" costs required to get the property rent-ready, such as closing costs and initial renovations.
- Net Operating Income (NOI): This is the total income generated by the property minus operating expenses. It does not include mortgage payments or capital expenditures.
- Cap Rate: The Capitalization Rate is calculated by dividing the NOI by the purchase price. It is used to estimate the investor's potential return on their investment in the real estate market without considering financing.
- Cash-on-Cash ROI: This is the annual cash flow divided by the total cash invested. This calculator assumes a cash purchase to show the core property performance.
Real-World Example
Imagine you purchase a duplex for $300,000. You pay $6,000 in closing costs and spend $10,000 on new flooring and paint. Your total investment is $316,000.
If you rent both units for a total of $2,200 per month and your monthly expenses (taxes, insurance, and a 10% buffer for vacancy/repairs) total $820, your monthly cash flow is $1,380.
This results in an annual profit of $16,560, which represents a 5.24% ROI.
How to Improve Your ROI
Investors can improve their ROI by increasing rental income (through value-add renovations), reducing operating expenses (appealing property tax assessments), or negotiating a lower purchase price. Always account for a "vacancy factor"—assuming the property will be empty at least 5-8% of the year—to ensure your ROI projections stay realistic.