Rental Property ROI Calculator
Understanding Your Rental Property ROI
Investing in real estate requires a deep dive into the numbers to ensure a property will generate a positive return. This calculator helps you break down the three most important metrics for rental property analysis: Cash Flow, Cap Rate, and Cash-on-Cash Return.
1. Monthly Cash Flow
This is the amount of money left over every month after all expenses and the mortgage have been paid. Positive cash flow is essential for building a sustainable portfolio. Our calculator subtracts the principal, interest, and your estimated operating expenses (like taxes, insurance, and maintenance) from the gross monthly rent.
2. Capitalization Rate (Cap Rate)
The Cap Rate measures the property's profitability regardless of the financing used. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price.
Formula: (Annual Rent – Annual Expenses) / Purchase Price
3. Cash-on-Cash (CoC) Return
This is often considered the most important metric for investors using leverage (mortgages). It measures the annual cash flow relative to the actual cash you invested (your down payment).
Formula: (Annual Cash Flow / Total Cash Invested) x 100
Example Calculation
Suppose you purchase a property for $250,000 with a 20% down payment ($50,000). If your monthly rent is $2,200 and your total monthly expenses (mortgage, tax, insurance) equal $1,800, your monthly cash flow is $400. Your annual cash flow is $4,800, resulting in a 9.6% Cash-on-Cash return ($4,800 / $50,000).