function calculateRentalROI() {
// Get input values
var price = parseFloat(document.getElementById('rp_price').value);
var downPayment = parseFloat(document.getElementById('rp_down').value);
var interestRate = parseFloat(document.getElementById('rp_rate').value);
var termYears = parseFloat(document.getElementById('rp_term').value);
var monthlyRent = parseFloat(document.getElementById('rp_rent').value);
var monthlyExpenses = parseFloat(document.getElementById('rp_expenses').value);
// Validation
if (isNaN(price) || isNaN(downPayment) || isNaN(interestRate) || isNaN(termYears) || isNaN(monthlyRent) || isNaN(monthlyExpenses)) {
alert("Please enter valid numbers in all fields.");
return;
}
// Mortgage Calculation
var loanAmount = price – downPayment;
var monthlyInterest = (interestRate / 100) / 12;
var totalPayments = termYears * 12;
var monthlyMortgage = 0;
if (loanAmount > 0) {
if (monthlyInterest > 0) {
monthlyMortgage = loanAmount * (monthlyInterest * Math.pow(1 + monthlyInterest, totalPayments)) / (Math.pow(1 + monthlyInterest, totalPayments) – 1);
} else {
monthlyMortgage = loanAmount / totalPayments;
}
}
// Cash Flow Calculation
var totalMonthlyCost = monthlyMortgage + monthlyExpenses;
var monthlyCashFlow = monthlyRent – totalMonthlyCost;
var annualCashFlow = monthlyCashFlow * 12;
// Cash on Cash Return Calculation
var cashOnCash = 0;
if (downPayment > 0) {
cashOnCash = (annualCashFlow / downPayment) * 100;
}
// Formatter
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
// Update UI
document.getElementById('rp_mortgage_display').innerText = formatter.format(monthlyMortgage);
document.getElementById('rp_total_cost_display').innerText = formatter.format(totalMonthlyCost);
var cashFlowElem = document.getElementById('rp_cashflow_display');
cashFlowElem.innerText = formatter.format(monthlyCashFlow);
cashFlowElem.className = 'rp-result-value ' + (monthlyCashFlow >= 0 ? 'positive' : 'negative');
document.getElementById('rp_annual_display').innerText = formatter.format(annualCashFlow);
var cocElem = document.getElementById('rp_coc_display');
cocElem.innerText = cashOnCash.toFixed(2) + '%';
cocElem.className = 'rp-result-value ' + (cashOnCash >= 0 ? 'positive' : 'negative');
// Show results
document.getElementById('rp_results').style.display = 'block';
}
Understanding Rental Property ROI
Investing in real estate is a popular strategy for building long-term wealth, but not every property is a good deal. To ensure your investment yields a profit, it is crucial to analyze the numbers objectively. This Rental Property ROI Calculator helps investors determine the viability of a potential purchase by calculating key metrics like monthly cash flow and Cash on Cash Return.
What is Cash on Cash Return?
Cash on Cash Return (CoC) is one of the most important metrics in real estate investing. Unlike standard Return on Investment (ROI) which might look at the total loan structure, CoC measures the annual return the investor made on the property in relation to the amount of mortgage paid during the same year. It is calculated as:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100%
A higher percentage generally indicates a better performing investment. Many investors target a CoC return between 8% and 12%, though this varies by market and strategy.
Calculating Monthly Cash Flow
Cash flow is the net amount of cash moving into or out of a business or investment. For a rental property, it is calculated by subtracting all monthly expenses from the monthly rental income. Positive cash flow means the property generates income, while negative cash flow means you are losing money every month to hold the asset.
Common expenses to include in your calculation:
Mortgage Principal & Interest: The primary loan payment.
Property Taxes: Local government taxes based on property value.
Insurance: Landlord insurance policies.
HOA Fees: If the property is in a managed community.
Maintenance & Repairs: Money set aside for future fixes (often estimated at 5-10% of rent).
Vacancy: An allowance for months when the property is empty (typically 5-8%).
How to Use This Calculator
To get the most accurate results, gather real data from the property listing and current mortgage rates. Enter the purchase price, your planned down payment, and the loan terms. Be realistic about the expected monthly rent—checking comparable rental listings in the neighborhood (comps) is essential. Finally, estimate your total monthly operating expenses, ensuring you account for taxes and insurance, which are often overlooked by novice investors.