function calculateRentalROI() {
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var annualTaxes = parseFloat(document.getElementById('annualTaxes').value) || 0;
var annualInsurance = parseFloat(document.getElementById('annualInsurance').value) || 0;
var maintenanceRate = parseFloat(document.getElementById('maintenanceRate').value) || 0;
var mgmtRate = parseFloat(document.getElementById('mgmtRate').value) || 0;
if (purchasePrice <= 0 || monthlyRent <= 0) {
alert('Please enter valid purchase price and rent amounts.');
return;
}
var annualGrossRent = monthlyRent * 12;
var maintenanceCost = (annualGrossRent * maintenanceRate) / 100;
var managementCost = (annualGrossRent * mgmtRate) / 100;
var totalExpenses = annualTaxes + annualInsurance + maintenanceCost + managementCost;
var noi = annualGrossRent – totalExpenses;
var capRate = (noi / purchasePrice) * 100;
var monthlyCashFlow = noi / 12;
var grm = purchasePrice / annualGrossRent;
document.getElementById('res-noi').innerText = '$' + noi.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('res-caprate').innerText = capRate.toFixed(2) + '%';
document.getElementById('res-monthly-cash').innerText = '$' + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('res-grm').innerText = grm.toFixed(2);
document.getElementById('roi-results').style.display = 'block';
}
Understanding Rental Property ROI
Investing in real estate is one of the most reliable ways to build wealth, but not every property is a "good" deal. To separate profitable investments from money pits, you need to understand Return on Investment (ROI) and Cap Rate.
Key Metrics Explained
Net Operating Income (NOI): This is your total annual income after all operating expenses (taxes, insurance, management, maintenance) have been paid, but before mortgage payments.
Cap Rate (Capitalization Rate): This is the ratio of NOI to the property purchase price. It allows you to compare different properties regardless of how they are financed.
Gross Rent Multiplier (GRM): A quick screening tool calculated by dividing the purchase price by the gross annual rent. A lower GRM usually indicates a better deal.
Example Calculation
Suppose you buy a property for $250,000. It rents for $2,000 per month ($24,000/year). Your annual expenses are:
• Taxes: $3,000
• Insurance: $1,200
• Maintenance (5%): $1,200
• Management (8%): $1,920
Total Expenses: $7,320
Your NOI would be $24,000 – $7,320 = $16,680. Your Cap Rate would be ($16,680 / $250,000) * 100 = 6.67%.
What is a "Good" ROI?
A "good" ROI depends on your market and risk tolerance. Generally, real estate investors look for a Cap Rate between 5% and 10%. In high-demand urban areas, yields might be lower (3-4%) but offer higher potential for capital appreciation. In rural or "emerging" markets, yields might exceed 12% but carry higher vacancy risks.