function calculateRentalROI() {
// 1. Get Inputs
var price = parseFloat(document.getElementById('rrc-price').value) || 0;
var downPayment = parseFloat(document.getElementById('rrc-down').value) || 0;
var closingCosts = parseFloat(document.getElementById('rrc-closing').value) || 0;
var rehabCosts = parseFloat(document.getElementById('rrc-rehab').value) || 0;
var interestRate = parseFloat(document.getElementById('rrc-rate').value) || 0;
var loanTerm = parseFloat(document.getElementById('rrc-term').value) || 0;
var monthlyRent = parseFloat(document.getElementById('rrc-rent').value) || 0;
var annualTax = parseFloat(document.getElementById('rrc-tax').value) || 0;
var annualInsurance = parseFloat(document.getElementById('rrc-insurance').value) || 0;
var monthlyHOA = parseFloat(document.getElementById('rrc-hoa').value) || 0;
var vacancyRate = parseFloat(document.getElementById('rrc-vacancy').value) || 0;
var maintenanceRate = parseFloat(document.getElementById('rrc-maintenance').value) || 0;
// 2. Calculate Mortgage (Principal & Interest)
var loanAmount = price – downPayment;
var monthlyRate = (interestRate / 100) / 12;
var totalPayments = loanTerm * 12;
var monthlyMortgage = 0;
if (interestRate > 0 && loanAmount > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)) / (Math.pow(1 + monthlyRate, totalPayments) – 1);
} else if (loanAmount > 0) {
// 0% interest case
monthlyMortgage = loanAmount / totalPayments;
}
// 3. Calculate Operating Expenses
var monthlyTax = annualTax / 12;
var monthlyInsurance = annualInsurance / 12;
var monthlyVacancy = monthlyRent * (vacancyRate / 100);
var monthlyMaintenance = monthlyRent * (maintenanceRate / 100);
// Total Operating Expenses (Does NOT include Mortgage)
var operatingExpenses = monthlyTax + monthlyInsurance + monthlyHOA + monthlyVacancy + monthlyMaintenance;
// 4. Calculate Key Metrics
var noi = monthlyRent – operatingExpenses; // Net Operating Income
var cashFlow = noi – monthlyMortgage;
var annualCashFlow = cashFlow * 12;
var annualNOI = noi * 12;
var totalInitialInvestment = downPayment + closingCosts + rehabCosts;
// Cash on Cash Return = Annual Cash Flow / Total Cash Invested
var cocReturn = 0;
if (totalInitialInvestment > 0) {
cocReturn = (annualCashFlow / totalInitialInvestment) * 100;
}
// Cap Rate = Annual NOI / Current Market Value (Purchase Price)
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
var totalMonthlyExpensesIncludingMortgage = operatingExpenses + monthlyMortgage;
// 5. Update DOM
document.getElementById('res-cashflow').innerText = '$' + cashFlow.toFixed(2);
document.getElementById('res-cashflow').className = cashFlow >= 0 ? "rrc-result-value rrc-highlight" : "rrc-result-value rrc-error";
document.getElementById('res-coc').innerText = cocReturn.toFixed(2) + '%';
document.getElementById('res-cap').innerText = capRate.toFixed(2) + '%';
document.getElementById('res-noi').innerText = '$' + noi.toFixed(2);
document.getElementById('res-expenses').innerText = '$' + totalMonthlyExpensesIncludingMortgage.toFixed(2);
document.getElementById('res-mortgage').innerText = '$' + monthlyMortgage.toFixed(2);
// Show results
document.getElementById('rrc-results').style.display = 'block';
}
Understanding Rental Property ROI: A Comprehensive Guide
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 rigorously analyze the numbers before signing a contract. This Rental Property ROI Calculator helps you evaluate the potential profitability of an investment property by breaking down cash flow, Cash-on-Cash Return, and Cap Rate.
Why Cash Flow is King
Cash Flow is the net amount of money moving in or out of your business (the property) each month. It is calculated by taking your total monthly rental income and subtracting all monthly expenses, including the mortgage payment.
Positive Cash Flow: The property pays for itself and generates profit every month.
Negative Cash Flow: You are losing money every month to hold the property, hoping for future appreciation.
For most beginner investors, aiming for positive cash flow is critical to reduce risk.
Cash-on-Cash Return (CoC) Explained
While cash flow tells you how much money you make monthly, Cash-on-Cash Return tells you how hard your money is working. It measures the annual pre-tax cash flow relative to the total amount of cash you invested upfront (Down Payment + Closing Costs + Rehab Costs).
Example: If you invest $50,000 cash to buy a house and it generates $5,000 in positive cash flow per year, your Cash-on-Cash return is 10%. This metric allows you to compare real estate against other investments like stocks or bonds.
What is Cap Rate?
The Capitalization Rate (Cap Rate) measures the property's natural rate of return, independent of financing. It is calculated by dividing the Net Operating Income (NOI) by the property's purchase price. Cap Rate is essential for comparing similar properties regardless of how they are purchased (cash vs. mortgage).
Hidden Expenses New Investors Miss
When using this calculator, ensure you don't overlook "silent" costs that eat into ROI:
Vacancy Rate: Properties won't be rented 100% of the time. Budgeting 5-8% allows for turnover periods.
Maintenance & CapEx: Roofs leak and toilets break. Setting aside 5-10% of rent helps cover these inevitable costs.
Property Management: If you don't plan to be a landlord yourself, expect to pay a property manager 8-10% of the monthly rent.
How to Use This Calculator
Input your purchase details, financing terms, and estimated expenses above. Be conservative with your estimates—it is better to be pleasantly surprised by higher returns than blindsided by unexpected costs. Adjust the rent and expense fields to see how different scenarios affect your bottom line.