Rental Property Profitability Calculator
Investment Analysis
Monthly Mortgage (P&I):
$0.00
Total Monthly Expenses:
$0.00
Monthly Cash Flow:
$0.00
Net Operating Income (Annual):
$0.00
Cash on Cash Return:
0.00%
Cap Rate:
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Understanding Rental Property ROI
Investing in real estate is a powerful way to build wealth, but simply buying a property doesn't guarantee profit. To ensure your investment makes financial sense, you must analyze the numbers accurately using a Rental Property ROI Calculator. This tool helps investors determine the Cash on Cash Return, Cap Rate, and Monthly Cash Flow—the three pillars of rental property profitability.
Why Cash Flow Matters
Cash flow is the net profit you realize each month after all operating expenses and mortgage payments have been made. A positive cash flow ensures that the property pays for itself and provides passive income.
- Positive Cash Flow: The rent covers all expenses with money left over.
- Negative Cash Flow: You must pay out of pocket to keep the property running.
Key Metrics Explained
Our calculator focuses on two critical metrics used by professional investors:
1. Cash on Cash Return (CoC)
This measures the annual return on the actual cash you invested (down payment + closing costs), rather than the total price of the property. It provides a true picture of your money's efficiency.
Formula: (Annual Cash Flow / Total Cash Invested) x 100
For example, if you invest $50,000 cash to buy a property and it generates $5,000 in net profit annually, your CoC return is 10%.
2. Capitalization Rate (Cap Rate)
Cap Rate measures the property's natural rate of return assuming you bought it with all cash. It helps compare the profitability of different properties regardless of financing.
Formula: (Net Operating Income / Purchase Price) x 100
Frequently Asked Questions
What is a good Cash on Cash return for a rental property?
Generally, a Cash on Cash return of 8% to 12% is considered solid for residential rental properties. However, some investors aim for 15%+ in higher-risk markets or short-term rentals.
How do I estimate maintenance costs?
A common rule of thumb is to budget 1% of the property value per year for maintenance, or set aside 10% of the monthly rent. This covers repairs, CapEx (capital expenditures like a new roof), and general upkeep.
Does this calculator include appreciation?
No, this calculator focuses on cash flow ROI. Appreciation is speculative and considered "icing on the cake." Prudent investors buy based on current cash flow numbers rather than hoped-for future value increases.