This calculator helps you estimate the potential return on investment (ROI) for a rental property. Understanding your ROI is crucial for making informed real estate investment decisions.
Your Estimated Rental Property ROI:
Understanding Rental Property ROI
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. In real estate, ROI helps you understand how much profit you're making relative to the total cost of acquiring and owning the property.
Key Components:
Property Purchase Price: The initial cost to buy the property.
Down Payment: The portion of the purchase price paid upfront.
Loan Amount: The amount borrowed to finance the purchase.
Closing Costs: Fees paid during the property transfer (e.g., appraisal, title insurance, legal fees).
Renovation Costs: Expenses incurred to improve or repair the property.
Annual Rental Income: The total rent collected from the property over a year.
Annual Operating Expenses: All recurring costs associated with owning and maintaining the property, excluding mortgage payments (e.g., property taxes, insurance, repairs, property management fees, vacancy costs).
Annual Mortgage Payment: The total amount paid towards the principal and interest on your mortgage loan for the year.
How ROI is Calculated:
The formula for calculating ROI for a rental property is generally:
ROI = [(Annual Rental Income – Annual Operating Expenses – Annual Mortgage Payment) / (Total Investment Cost)] * 100
Total Investment Cost includes the down payment, closing costs, and renovation costs. If the property is owned outright (no mortgage), the loan amount and annual mortgage payment would be zero.
A higher ROI indicates a more profitable investment. It's essential to compare this figure against other potential investments to make the best financial decisions.
function calculateROI() {
var purchasePrice = parseFloat(document.getElementById("purchasePrice").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
var renovationCosts = parseFloat(document.getElementById("renovationCosts").value);
var annualRentalIncome = parseFloat(document.getElementById("annualRentalIncome").value);
var annualOperatingExpenses = parseFloat(document.getElementById("annualOperatingExpenses").value);
var annualMortgagePayment = parseFloat(document.getElementById("annualMortgagePayment").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(purchasePrice) || purchasePrice <= 0 ||
isNaN(downPayment) || downPayment < 0 ||
isNaN(loanAmount) || loanAmount < 0 ||
isNaN(closingCosts) || closingCosts < 0 ||
isNaN(renovationCosts) || renovationCosts < 0 ||
isNaN(annualRentalIncome) || annualRentalIncome < 0 ||
isNaN(annualOperatingExpenses) || annualOperatingExpenses < 0 ||
isNaN(annualMortgagePayment) || annualMortgagePayment purchasePrice) {
resultDiv.innerHTML = "Down payment cannot exceed purchase price if there is no loan.";
return;
}
// In this case, the total investment cost is purchase price + closing + renovation, assuming down payment is the full purchase price.
// However, the formula correctly uses downPayment as part of the initial cash outlay.
} else if (downPayment + loanAmount !== purchasePrice) {
// A more robust check, though typically loan + down payment should equal purchase price.
// For simplicity, we'll proceed with the provided downPayment and loanAmount.
// If they don't sum to purchase price, it implies other financing or discrepancies.
}
var totalInvestmentCost = downPayment + closingCosts + renovationCosts;
// If there's a loan, the investment cost is typically considered the initial cash outlay (down payment + closing + renovation).
// The mortgage payment is an ongoing expense.
var netOperatingIncome = annualRentalIncome – annualOperatingExpenses;
var cashFlow = netOperatingIncome – annualMortgagePayment;
// Ensure total investment cost is not zero to avoid division by zero
if (totalInvestmentCost === 0) {
resultDiv.innerHTML = "Total investment cost cannot be zero.";
return;
}
var roi = (cashFlow / totalInvestmentCost) * 100;
resultDiv.innerHTML = "Total Investment Cost: $" + totalInvestmentCost.toFixed(2) + "" +
"Net Operating Income (NOI): $" + netOperatingIncome.toFixed(2) + "" +
"Annual Cash Flow: $" + cashFlow.toFixed(2) + "" +
"Estimated Annual ROI:= 0 ? "color: green;" : "color: red;") + "'>" + roi.toFixed(2) + "%";
}
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