Rental Property ROI & Cap Rate Calculator
Investment Summary
Monthly Cash Flow:
Cap Rate:
Cash on Cash Return:
Monthly Mortgage (P&I):
Total Initial Investment:
Net Operating Income (NOI):
How to Evaluate Rental Property Profitability
Investing in real estate requires more than just looking at the sticker price. To determine if a rental property is a "good deal," savvy investors use several key metrics to measure performance. This calculator helps you analyze the three most critical numbers: Cash Flow, Cap Rate, and Cash on Cash Return.
Key Metrics Explained
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated by dividing the Net Operating Income (NOI) by the purchase price. A cap rate between 4% and 10% is common depending on the market.
- Cash Flow: This is the "take-home" money left over every month after every single expense is paid, including the mortgage, taxes, insurance, and maintenance reserves.
- Cash on Cash Return (CoC): This is often considered the most important metric for leveraged investors. It measures the annual cash flow relative to the actual amount of cash you "out-of-pocketed" (the down payment and closing costs).
Example Calculation
Imagine you buy a property for $200,000 with a 20% down payment ($40,000).
If the monthly rent is $1,800 and your total operating expenses (taxes, insurance, repairs) are $500, your NOI is $1,300/month or $15,600/year.
Your Cap Rate would be: $15,600 / $200,000 = 7.8%.
If your mortgage payment is $950, your monthly cash flow is $1,800 – $500 – $950 = $350.
Your Cash on Cash Return would be: ($350 * 12) / $40,000 = 10.5%.
Pro Tips for Real Estate Investors
1. Don't forget the "Hidden" expenses: Always factor in a 5-10% vacancy rate and 10% for future repairs/capital expenditures.
2. Location vs. Yield: High-growth areas often have lower cap rates but offer better appreciation potential. High-yield areas often come with higher tenant turnover risks.