Rental Property ROI Calculator
Analyze the cash flow and profitability of your real estate investment.
Please enter valid positive numbers for all fields.
Investment Analysis
Monthly Mortgage Payment (P&I):
$0.00
Total Monthly Expenses:
$0.00
Monthly Cash Flow:
$0.00
Annual Cash Flow:
$0.00
Total Cash Invested:
$0.00
Cash on Cash ROI:
0.00%
Cap Rate:
0.00%
Understanding Rental Property ROI
Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property and renting it out doesn't guarantee a profit. To succeed, investors must understand the key metrics that determine a property's profitability. Our Rental Property ROI Calculator helps you crunch the numbers before you sign the deed.
What is Cash Flow?
Cash flow is the net amount of cash moving into or out of your investment each month. It is calculated by subtracting your total monthly expenses (mortgage, taxes, insurance, repairs) from your monthly rental income. Positive cash flow means the property pays for itself and generates profit.
Cash flow is the net amount of cash moving into or out of your investment each month. It is calculated by subtracting your total monthly expenses (mortgage, taxes, insurance, repairs) from your monthly rental income. Positive cash flow means the property pays for itself and generates profit.
Key Investment Metrics Explained
1. Cash on Cash Return (CoC ROI)
This is arguably the most important metric for rental investors. It measures the annual return you earn on the cash you actually invested (down payment + closing costs), rather than the total price of the property. A high Cash on Cash return indicates your money is working efficiently.
- Formula: Annual Pre-Tax Cash Flow / Total Cash Invested
- Good Benchmark: Many investors aim for 8-12%, though this varies by market.
2. Cap Rate (Capitalization Rate)
Cap rate measures the natural rate of return of the property assuming you bought it with all cash (no loan). It helps you compare the quality of different properties regardless of financing.
- Formula: Net Operating Income (NOI) / Purchase Price
- Note: NOI is your rental income minus operating expenses, excluding mortgage payments.
How to Improve Your ROI
If the calculator shows a negative cash flow or low ROI, consider these strategies:
- Negotiate Purchase Price: A lower price reduces your mortgage and down payment, boosting all metrics.
- Increase Rent: Small cosmetic improvements can often justify a higher monthly rent.
- Reduce Expenses: Shop around for cheaper insurance or handle minor maintenance tasks yourself.
Use this tool to test different scenarios—like putting down a larger down payment or securing a lower interest rate—to see how they impact your bottom line.