Rental Property ROI Calculator
Investment Summary
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 Use the Rental ROI Calculator
Calculating the Return on Investment (ROI) is the most critical step for any real estate investor. This calculator helps you determine if a rental property is a "gold mine" or a "money pit" by analyzing cash flow, Cap Rate, and Cash-on-Cash returns.
Understanding Key Real Estate Metrics
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated by dividing the Net Operating Income (NOI) by the purchase price.
- Cash-on-Cash Return: This is the ratio of annual before-tax cash flow to the total amount of cash invested. It is highly dependent on your loan terms and down payment.
- Net Operating Income (NOI): Your total annual income minus all operating expenses (taxes, insurance, maintenance), excluding mortgage payments.
Example Calculation
Suppose you purchase a duplex for $300,000 with a $60,000 down payment. If your monthly rent is $2,500 and your total expenses (including mortgage, taxes, and insurance) come to $2,100, your monthly cash flow is $400. Your annual cash flow would be $4,800. To find your Cash-on-Cash return, you divide $4,800 by your initial investment (down payment + closing costs).
Factors That Influence Your ROI
Real estate investing involves more than just rent and mortgage. Consider these "hidden" costs when using the calculator:
Vacancy Rates: No property is occupied 100% of the time. Professional investors usually factor in a 5-8% vacancy loss.
Maintenance and Repairs: Older homes require more upkeep. Setting aside 10% of the monthly rent for repairs is a standard "rule of thumb" to avoid surprise expenses.
Property Management: If you aren't managing the property yourself, expect to pay 8-12% of the monthly rent to a management company.