Rental Property ROI Calculator
Analyze your real estate investment potential in seconds.
Monthly Mortgage (P&I):
$0.00
Total Monthly Expenses:
$0.00
Monthly Cash Flow:
$0.00
Cap Rate:
0.00%
Cash on Cash Return:
0.00%
How to Calculate Rental Property ROI
Investing in real estate requires more than just looking at the monthly rent. To truly understand if a property is a good deal, you must calculate your Return on Investment (ROI). This calculator evaluates your potential profit by weighing your income against mortgage obligations and operating expenses.
Key Real Estate Metrics Explained
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price.
- Cash on Cash Return: This is often considered the most important metric for investors using leverage. It measures the annual cash flow relative to the actual "out of pocket" cash you invested (your down payment).
- Net Cash Flow: The amount of money left over each month after every expense is paid, including the mortgage, taxes, insurance, and maintenance reserves.
Real-World Example
Imagine purchasing a property for $300,000 with a 20% down payment ($60,000). If the monthly rent is $2,500 and your total expenses (mortgage, taxes, insurance, and maintenance) come to $2,100, your monthly cash flow is $400. This results in an annual profit of $4,800. Your Cash on Cash return would be 8% ($4,800 / $60,000).
Important Considerations
Always account for a Vacancy Rate (usually 5-10%). Even the best properties sit empty occasionally. By factoring this into your "Maintenance & Vacancy" input, you ensure your ROI projections remain realistic even during tenant turnovers.