Rental Property ROI & Cash Flow Calculator
Analyze your real estate investment potential with precision.
Investment Analysis Results
Understanding Rental Property ROI
Investing in real estate is one of the most proven ways to build long-term wealth. However, the difference between a "good deal" and a "money pit" often comes down to the math. Our Rental Property ROI Calculator helps you strip away the emotion and look strictly at the financial performance of a property.
Key Metrics Explained
- Cash-on-Cash Return: This measures the annual cash flow relative to the actual amount of cash you invested. It is often considered the most important metric for rental investors.
- Cap Rate (Capitalization Rate): This calculates the property's natural rate of return without considering financing. It's used to compare the profitability of different properties regardless of how they are paid for.
- Vacancy Rate: Real estate isn't always occupied. A 5% to 8% vacancy buffer is a standard conservative estimate to ensure your numbers remain realistic.
Realistic Example:
Imagine you purchase a duplex for $300,000. You spend $15,000 on closing costs and minor paint jobs. Your total out-of-pocket is $315,000 (assuming a cash purchase for this example, or your down payment + costs).
If the units rent for a combined $2,500 per month, your gross annual income is $30,000. After subtracting taxes, insurance, and a 5% vacancy rate, your net profit might be $18,000. This results in a 5.7% ROI.
How to Improve Your Rental ROI
If your calculated ROI is lower than desired, consider these three levers:
1. Value-Add Renovations: Increasing the quality of the kitchen or flooring can often justify a significant rent increase, boosting your numerator (income) more than your denominator (investment).
2. Expense Management: Periodically shop around for landlord insurance or appeal property tax assessments to lower your recurring monthly costs.
3. Optimize Financing: If interest rates drop, refinancing your mortgage can significantly increase your monthly cash flow.