function calculateROI() {
// Inputs
var price = parseFloat(document.getElementById('propPrice').value) || 0;
var closing = parseFloat(document.getElementById('closingCosts').value) || 0;
var downPercent = parseFloat(document.getElementById('downPayment').value) || 0;
var interest = parseFloat(document.getElementById('interestRate').value) || 0;
var years = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var vacancyPercent = parseFloat(document.getElementById('vacancyRate').value) || 0;
var taxYearly = parseFloat(document.getElementById('propertyTax').value) || 0;
var insuranceYearly = parseFloat(document.getElementById('insurance').value) || 0;
var hoaMonthly = parseFloat(document.getElementById('hoaFees').value) || 0;
var maintPercent = parseFloat(document.getElementById('maintenance').value) || 0;
// Calculations
var downPaymentAmount = price * (downPercent / 100);
var loanAmount = price – downPaymentAmount;
// Mortgage Calculation
var monthlyRate = (interest / 100) / 12;
var numberOfPayments = years * 12;
var mortgagePayment = 0;
if (interest > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
mortgagePayment = loanAmount / numberOfPayments;
}
// Income Calculations
var vacancyAmount = rent * (vacancyPercent / 100);
var effectiveRent = rent – vacancyAmount;
// Expense Calculations
var maintAmount = rent * (maintPercent / 100);
var monthlyTax = taxYearly / 12;
var monthlyIns = insuranceYearly / 12;
var operatingExpenses = monthlyTax + monthlyIns + hoaMonthly + maintAmount + vacancyAmount;
var totalMonthlyExpenses = operatingExpenses + mortgagePayment;
// Return Calculations
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// Net Operating Income (NOI) = (Gross Income – Operating Expenses) * 12
// Note: NOI usually excludes mortgage payments
var monthlyNOI = rent – operatingExpenses;
var annualNOI = monthlyNOI * 12;
var totalCashInvested = downPaymentAmount + closing;
var capRate = (price > 0) ? (annualNOI / price) * 100 : 0;
var cashOnCash = (totalCashInvested > 0) ? (annualCashFlow / totalCashInvested) * 100 : 0;
// Display Results
document.getElementById('roiResults').style.display = 'block';
// Formatter
var currency = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
var percent = new Intl.NumberFormat('en-US', { style: 'percent', minimumFractionDigits: 2, maximumFractionDigits: 2 });
document.getElementById('resGrossIncome').innerText = currency.format(rent);
document.getElementById('resMortgage').innerText = currency.format(mortgagePayment);
document.getElementById('resExpenses').innerText = currency.format(totalMonthlyExpenses);
var cashFlowElem = document.getElementById('resCashFlow');
cashFlowElem.innerText = currency.format(monthlyCashFlow);
cashFlowElem.className = 'roi-result-value ' + (monthlyCashFlow >= 0 ? 'roi-highlight' : 'roi-highlight-bad');
document.getElementById('resNOI').innerText = currency.format(annualNOI);
document.getElementById('resCapRate').innerText = percent.format(capRate / 100);
var cocElem = document.getElementById('resCoC');
cocElem.innerText = percent.format(cashOnCash / 100);
cocElem.className = 'roi-result-value ' + (cashOnCash >= 0 ? 'roi-highlight' : 'roi-highlight-bad');
}
What is Rental Property ROI?
Return on Investment (ROI) is a key performance indicator used by real estate investors to evaluate the profitability of an investment property. Unlike buying a home to live in, buying a rental property is a business decision that relies heavily on the numbers. This calculator helps you determine if a specific property will generate positive cash flow and provide a healthy return on your initial cash investment.
Understanding the Key Metrics
When analyzing a rental deal, there are three primary metrics you should focus on:
- Cash Flow: This is the net amount of money left in your pocket every month after all expenses (mortgage, taxes, insurance, repairs) are paid. Positive cash flow is essential for long-term sustainability.
- Cap Rate (Capitalization Rate): This measures the natural rate of return of the property assuming you bought it with all cash. It is calculated by dividing the Net Operating Income (NOI) by the purchase price. It helps compare properties regardless of financing methods.
- Cash on Cash Return (CoC): This is arguably the most important metric for investors using leverage (mortgages). It measures how hard your actual invested cash is working for you. It is calculated by dividing annual pre-tax cash flow by the total cash invested (Down Payment + Closing Costs).
How to Calculate Cash Flow
The formula for monthly cash flow is straightforward but requires accuracy regarding expenses:
Cash Flow = Gross Monthly Rent – (Mortgage + Taxes + Insurance + HOA + Vacancy + Maintenance)
Many new investors make the mistake of only subtracting the mortgage payment from the rent. However, you must account for "silent" expenses like vacancy (months where you have no tenant) and maintenance reserves (saving for a new roof or HVAC).
What is a Good ROI for Rental Property?
While "good" is subjective and depends on your investment strategy and local market conditions, many investors aim for:
- Cash Flow: $100 – $300 per door, per month.
- Cash on Cash Return: 8% to 12% or higher. This often beats the average return of the stock market while providing the added benefits of tax depreciation and property appreciation.
- Cap Rate: 5% to 10%. Higher cap rates usually indicate higher risk areas or lower asset quality, while lower cap rates are common in Class A neighborhoods with high appreciation potential.
Tips for Maximizing Your Returns
To improve your rental property ROI, consider value-add strategies. This could include cosmetic renovations (new paint, flooring) to increase rent, minimizing vacancy by treating tenants well, or disputing property tax assessments to lower annual expenses. Always run the numbers conservatively—overestimating rent or underestimating repairs is the fastest way to negative cash flow.
{
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"mainEntity": [{
"@type": "Question",
"name": "What is Cash on Cash Return?",
"acceptedAnswer": {
"@type": "Answer",
"text": "Cash on Cash Return is a metric that calculates the cash income earned on the cash invested in a property. It is calculated by dividing the annual pre-tax cash flow by the total cash invested (down payment plus closing costs)."
}
}, {
"@type": "Question",
"name": "How do I calculate rental property cash flow?",
"acceptedAnswer": {
"@type": "Answer",
"text": "Rental property cash flow is calculated by taking the gross monthly rental income and subtracting all monthly expenses, including mortgage payments, property taxes, insurance, HOA fees, maintenance reserves, and vacancy allowances."
}
}, {
"@type": "Question",
"name": "What is the 50% rule in real estate?",
"acceptedAnswer": {
"@type": "Answer",
"text": "The 50% rule is a quick heuristic used by investors which suggests that 50% of your gross rental income will go toward operating expenses (excluding the mortgage payment). It helps in quickly screening properties before doing a deep analysis."
}
}]
}