function calculateRentalROI() {
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value);
var downPaymentPercent = parseFloat(document.getElementById('downPaymentPercent').value);
var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12;
var loanTerm = parseFloat(document.getElementById('loanTerm').value) * 12;
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var annualTaxes = parseFloat(document.getElementById('propertyTaxes').value);
var annualInsurance = parseFloat(document.getElementById('insurance').value);
var reservePercent = parseFloat(document.getElementById('reservePercent').value) / 100;
if (isNaN(purchasePrice) || isNaN(monthlyRent)) {
alert("Please enter valid numeric values for price and rent.");
return;
}
// Loan Logic
var downPaymentAmount = purchasePrice * (downPaymentPercent / 100);
var loanPrincipal = purchasePrice – downPaymentAmount;
var monthlyMortgage = 0;
if (interestRate > 0) {
monthlyMortgage = loanPrincipal * (interestRate * Math.pow(1 + interestRate, loanTerm)) / (Math.pow(1 + interestRate, loanTerm) – 1);
} else {
monthlyMortgage = loanPrincipal / loanTerm;
}
// Expense Logic
var monthlyTaxes = annualTaxes / 12;
var monthlyInsurance = annualInsurance / 12;
var monthlyReserve = monthlyRent * reservePercent;
var totalMonthlyExpenses = monthlyMortgage + monthlyTaxes + monthlyInsurance + monthlyReserve;
// Return Logic
var monthlyCashFlow = monthlyRent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
var cashOnCashReturn = (annualCashFlow / downPaymentAmount) * 100;
// Cap Rate Logic (NOI / Purchase Price)
var annualGrossIncome = monthlyRent * 12;
var annualOperatingExpenses = annualTaxes + annualInsurance + (monthlyReserve * 12);
var netOperatingIncome = annualGrossIncome – annualOperatingExpenses;
var capRate = (netOperatingIncome / purchasePrice) * 100;
// Display Results
document.getElementById('resCashFlow').innerText = "$" + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCoC').innerText = cashOnCashReturn.toFixed(2) + "%";
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
document.getElementById('resInvestment').innerText = "$" + downPaymentAmount.toLocaleString();
document.getElementById('roiResult').style.display = 'block';
}
How to Calculate Rental Property ROI
Investing in real estate is a proven path to wealth, but buying the right property requires more than just a gut feeling. A Rental Property ROI Calculator helps you determine if a deal is a "home run" or a potential "money pit."
Key Metrics Explained
- Cash-on-Cash Return: This is the most important metric for many investors. It measures the annual cash flow relative to the actual cash you invested (your down payment and closing costs).
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It's calculated by dividing Net Operating Income (NOI) by the purchase price.
- Net Operating Income (NOI): This is your total income minus all operating expenses (taxes, insurance, repairs), but before paying your mortgage.
- Reserves: Smart investors always set aside 5-10% of rent for vacancies and maintenance repairs.
Example Scenario
Imagine you purchase a duplex for $300,000 with a 20% down payment ($60,000). Your monthly rent is $2,500. After paying your mortgage, taxes, insurance, and setting aside 10% for repairs, your monthly cash flow is $350.
Your annual cash flow would be $4,200 ($350 x 12). To find your Cash-on-Cash return, you divide $4,200 by your $60,000 investment, resulting in a 7% ROI.
What is a "Good" ROI?
While this varies by market, many real estate investors aim for a Cash-on-Cash return of 8% to 12%. In high-appreciation areas (like coastal cities), investors might accept a lower ROI (2-4%) in exchange for the property value increasing over time. Conversely, in stable "cash flow" markets (like the Midwest), investors often look for 10% or higher.