Rental Property ROI & Cap Rate Calculator
Analyze the profitability of your real estate investments in seconds.
Net Operating Income (Annual):
$0.00
Capitalization Rate (Cap Rate):
0.00%
Monthly Cash Flow:
$0.00
Cash-on-Cash Return:
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Understanding Rental Property Metrics
Evaluating a potential rental property requires more than just looking at the monthly rent. Professional investors use specific metrics like Cap Rate and Cash-on-Cash Return to determine if a deal is worth pursuing.
1. Net Operating Income (NOI)
NOI is the total income generated by the property minus all necessary operating expenses (excluding mortgage payments). This shows how much cash the property generates on its own merits.
2. Capitalization Rate (Cap Rate)
The Cap Rate is the ratio of Net Operating Income to the property purchase price. It is used to compare different real estate investments without considering financing variables. Generally, a "good" cap rate falls between 4% and 10% depending on the market.
Example Calculation:
If you buy a house for $200,000 and it generates $12,000 in annual NOI, your Cap Rate is 6% ($12,000 / $200,000).
If you buy a house for $200,000 and it generates $12,000 in annual NOI, your Cap Rate is 6% ($12,000 / $200,000).
3. Cash-on-Cash Return
This is often considered the most important metric for investors using leverage (mortgages). It measures the annual cash flow relative to the actual amount of cash you "out-of-pocketed" (Down payment + Closing costs).
Factors That Impact Your ROI
- Vacancy Rate: Always account for 5-10% vacancy to be realistic.
- Maintenance: Older homes typically require 1-2% of the property value annually in repairs.
- Property Management: If you aren't managing it yourself, expect to pay 8-12% of gross rent.
- Appreciation: While our calculator focuses on cash flow, long-term value increases are a massive part of real estate wealth.