Rental Property ROI Calculator
Calculate your potential return on investment, cap rate, and monthly cash flow.
Monthly Mortgage (P&I):
Total Monthly Outflow:
Net Monthly Cash Flow:
Capitalization Rate (Cap Rate):
Cash on Cash ROI (Annual):
Understanding Your Rental Property ROI
Investing in real estate is one of the most proven ways to build long-term wealth. However, the difference between a profitable investment and a financial burden lies in the math. This Rental Property ROI Calculator helps you strip away the guesswork and focus on the raw numbers.
Key Metrics Explained
- Cash Flow: This is the net amount of cash moving into your pocket every month after all expenses and mortgage payments are paid. Positive cash flow is essential for sustainability.
- Cap Rate: Short for Capitalization Rate, this measures the property's natural rate of return without considering financing. It's calculated by taking Net Operating Income (NOI) divided by the purchase price.
- Cash on Cash ROI: This is often considered the most important metric for investors using leverage. It calculates the annual return based specifically on the actual cash you "out-of-pocketed" (your down payment).
Example Calculation
Imagine you purchase a property for $250,000 with a 20% down payment ($50,000). Your monthly rent is $2,200, and your total expenses (mortgage, taxes, insurance) come to $1,800. Your monthly cash flow is $400. Annually, that is $4,800. Your Cash on Cash ROI would be $4,800 / $50,000 = 9.6%.
Pro Tips for Real Estate Investors
When calculating ROI, don't forget to account for "hidden" costs like vacancy rates (usually 5-10%) and a maintenance reserve. Professional investors usually set aside 10% of gross rent for future repairs to ensure their ROI remains accurate over the long term.