Rental Property ROI Calculator
Calculate Cash Flow, Cap Rate, and Cash on Cash Return
Monthly Principal & Interest:
$0.00
Total Monthly Expenses:
$0.00
Net Operating Income (Monthly):
$0.00
Monthly Cash Flow:
$0.00
Cap Rate:
0.00%
Cash on Cash Return:
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Understanding Rental Property Investment Metrics
Investing in real estate requires analyzing the numbers to ensure the property will perform financially. This calculator helps investors break down the profitability of a potential rental unit using three key metrics: Cash Flow, Cap Rate, and Cash on Cash Return.
Key Terms Explained
- Cash Flow: The net amount of cash moving in or out of the investment each month. It is calculated by subtracting total expenses (mortgage, taxes, insurance, HOA, vacancy allowance) from the monthly rental income. Positive cash flow means the property pays for itself and generates profit.
- Cap Rate (Capitalization Rate): A measure of the property's natural rate of return, independent of debt. It is calculated as Net Operating Income (NOI) / Purchase Price. A higher Cap Rate generally indicates a better potential return or a higher risk asset.
- Cash on Cash Return: This metric calculates the cash income earned on the cash invested in the property. It is determined by dividing the annual pre-tax cash flow by the total cash invested (Down Payment + Closing Costs). This is often considered the most important metric for leverage investors.
Realistic Example
Imagine purchasing a single-family home for $250,000. You put $50,000 (20%) down and pay $5,000 in closing costs.
If the property rents for $2,200/month and your total operating expenses (taxes, insurance, maintenance) plus mortgage payments equal $1,900/month, your monthly cash flow is $300.
This results in an annual cash flow of $3,600. With a total cash investment of $55,000, your Cash on Cash return would be roughly 6.5%.