Rental Property Cash Flow & ROI Calculator
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Rental Property ROI Calculator
The Ultimate Rental Property Cash Flow & ROI Calculator
Real estate investing relies on accurate numbers. Whether you are analyzing a single-family home, a duplex, or a condo, understanding your numbers is the difference between a profitable asset and a financial liability. This Rental Property Cash Flow & ROI Calculator is designed to help investors quickly evaluate the profitability of a potential real estate deal.
How to Calculate Rental Property Returns
Calculating the return on investment (ROI) for a rental property involves analyzing both the income the property generates and the expenses required to maintain it. There are three primary metrics every investor should know: Cash Flow, Cap Rate, and Cash on Cash Return.
1. Monthly Cash Flow
Cash flow is the net amount of money moving in or out of your pocket every month. It is calculated by taking your total monthly rental income and subtracting all expenses, including the mortgage payment.
Formula: Total Income – (Operating Expenses + Debt Service) = Cash Flow
Positive cash flow means the property pays for itself and generates profit. Negative cash flow means you are losing money every month to hold the property.
2. Cash on Cash ROI (CoC)
This is arguably the most important metric for investors using leverage (mortgages). It measures the annual return on the actual cash you invested, rather than the total purchase price.
Formula: (Annual Cash Flow / Total Cash Invested) x 100
For example, if you invest $50,000 (down payment + closing costs) and the property generates $5,000 in positive cash flow per year, your Cash on Cash ROI is 10%. This allows you to compare real estate returns against stocks or other investment vehicles.
3. Capitalization Rate (Cap Rate)
The Cap Rate measures the natural rate of return of the property assuming you bought it with all cash. It allows you to compare the profitability of properties regardless of how they are financed.
Formula: (Net Operating Income / Purchase Price) x 100
Understanding Your Expenses
New investors often underestimate expenses, leading to "false positive" calculations. When using this calculator, ensure you account for:
- Vacancy Rate: Properties won't be occupied 100% of the time. A standard 5% to 8% deduction accounts for turnover periods.
- Maintenance & Repairs: Even if the house is new, things break. Budgeting 5-10% of rent for repairs is prudent.
- CapEx (Capital Expenditures): These are big-ticket items like roofs, HVAC, and water heaters. While not monthly costs, they should be saved for monthly.
- Property Management: If you hire a manager, they typically charge 8-10% of the monthly rent. Even if you self-manage, it is wise to factor this cost in to see if the deal still works.
Frequently Asked Questions
What is a good Cash on Cash return?
This varies by market and investor goals. Generally, a Cash on Cash return of 8-12% is considered strong in stable markets. In high-appreciation markets, investors might accept lower cash flow (4-6%) in exchange for potential equity growth.
Does this calculator include appreciation?
No, this calculator focuses on cash flow. Appreciation is speculative. Prudent investors buy for cash flow and treat appreciation as a bonus ("icing on the cake").
Why is my Cash Flow negative?
If your result shows negative cash flow, the operating expenses and mortgage payment exceed the rental income. This often happens if the purchase price is too high, the down payment is too low (resulting in a high mortgage), or the rent is under market value.
function calculateRentalROI() {
// Inputs
var price = parseFloat(document.getElementById("purchasePrice").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTerm").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
var monthlyRent = parseFloat(document.getElementById("monthlyRent").value);
var annualTax = parseFloat(document.getElementById("propertyTax").value);
var annualInsurance = parseFloat(document.getElementById("insurance").value);
var monthlyHOA = parseFloat(document.getElementById("hoa").value);
var monthlyMaintenance = parseFloat(document.getElementById("maintenance").value);
var vacancyRate = parseFloat(document.getElementById("vacancyRate").value);
var errorMsg = document.getElementById("errorMessage");
var resultsArea = document.getElementById("results-area");
// Validation
if (isNaN(price) || isNaN(downPayment) || isNaN(monthlyRent) || price 0) {
var monthlyInterestRate = (interestRate / 100) / 12;
var numberOfPayments = loanTermYears * 12;
if (interestRate === 0) {
monthlyMortgage = loanAmount / numberOfPayments;
} else {
monthlyMortgage = loanAmount *
(monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) /
(Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
}
// Expense Calculations
var monthlyTax = annualTax / 12;
var monthlyInsurance = annualInsurance / 12;
var vacancyCost = monthlyRent * (vacancyRate / 100);
var totalOperatingExpenses = monthlyTax + monthlyInsurance + monthlyHOA + monthlyMaintenance + vacancyCost;
var totalMonthlyOutflow = totalOperatingExpenses + monthlyMortgage;
// Income Metrics
var monthlyCashFlow = monthlyRent – totalMonthlyOutflow;
var annualCashFlow = monthlyCashFlow * 12;
var annualNOI = (monthlyRent * 12) – (totalOperatingExpenses * 12);
// ROI Metrics
var totalCashInvested = downPayment + closingCosts;
var cashOnCashROI = 0;
if (totalCashInvested > 0) {
cashOnCashROI = (annualCashFlow / totalCashInvested) * 100;
}
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// Display Results
// Helper formatting function
var fmtMoney = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
var fmtPct = new Intl.NumberFormat('en-US', { style: 'percent', minimumFractionDigits: 2, maximumFractionDigits: 2 });
document.getElementById("resCashFlow").innerHTML = fmtMoney.format(monthlyCashFlow);
document.getElementById("resCashFlow").style.color = monthlyCashFlow >= 0 ? "#28a745" : "#dc3545";
document.getElementById("resCoc").innerHTML = fmtPct.format(cashOnCashROI / 100); // format expects 0-1 for percent
document.getElementById("resCoc").style.color = cashOnCashROI >= 0 ? "#28a745" : "#dc3545";
document.getElementById("resCapRate").innerHTML = fmtPct.format(capRate / 100);
document.getElementById("resTotalIncome").innerHTML = fmtMoney.format(monthlyRent);
document.getElementById("resMortgage").innerHTML = fmtMoney.format(monthlyMortgage);
document.getElementById("resOpEx").innerHTML = fmtMoney.format(totalOperatingExpenses);
document.getElementById("resNOI").innerHTML = fmtMoney.format(annualNOI);
}