Rental Property ROI Calculator
Monthly Mortgage (P&I)
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Monthly Cash Flow
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Annual Cash-on-Cash ROI
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Cap Rate
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How to Calculate Rental Property ROI
Understanding your Return on Investment (ROI) is critical for any real estate investor. This calculator helps you determine if a potential rental property will be a "cash cow" or a "money pit" by analyzing the relationship between acquisition costs, financing, and operating expenses.
Key Metrics Explained
- Cash-on-Cash Return: This is the ratio of annual before-tax cash flow to the total amount of cash invested. It is expressed as a percentage and is often considered the most important metric for rental investors.
- Cap Rate (Capitalization Rate): Calculated as Net Operating Income (NOI) divided by the purchase price. This metric ignores financing and shows the property's natural yield.
- Net Cash Flow: The amount of money left over every month after all bills—including the mortgage, taxes, insurance, and maintenance reserves—have been paid.
Real-World Example
Imagine you buy a property for $250,000 with a 20% down payment ($50,000). If your total monthly expenses (mortgage, tax, insurance, and maintenance) are $1,800 and you rent the home for $2,200, your monthly cash flow is $400. Your annual cash flow would be $4,800. To find your ROI, divide $4,800 by your initial $50,000 investment, resulting in a 9.6% Cash-on-Cash Return.
Factors That Influence Your Return
Investment returns aren't static. Savvy investors always account for Vacancy Rates (usually 5-8%) and Maintenance Reserves. If you fail to set aside money for a leaky roof or a broken HVAC system, your "paper profit" will disappear quickly when repairs are needed. Our calculator includes a "Maintenance & Vacancy" field to ensure your projections remain realistic.