Investing in real estate is one of the most proven ways to build wealth, but the numbers must make sense. Our Rental Property ROI Calculator helps you analyze the profitability of a potential investment property by calculating key financial metrics like Cash Flow, Cap Rate, and Cash-on-Cash Return.
Key Real Estate Metrics Explained
Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated as Net Operating Income (NOI) divided by the purchase price.
Cash-on-Cash Return (CoC): This is often the most important metric for investors using leverage (mortgages). It measures the annual cash flow relative to the actual cash you invested (down payment).
Monthly Cash Flow: The amount of money left over after every single expense—mortgage, taxes, insurance, and maintenance—has been paid.
Example ROI Calculation
Imagine you purchase a duplex for $300,000 with a $60,000 down payment (20%). If your total monthly expenses (mortgage, tax, insurance) are $2,100 and the rent is $2,500, you have a monthly cash flow of $400.
Your annual cash flow would be $4,800. To find your Cash-on-Cash return, you divide $4,800 by your initial $60,000 investment, resulting in an 8% ROI.
Factors That Affect Your Return
When using this calculator, remember to account for "hidden" costs. Professional investors usually set aside 5-10% for vacancies and another 5-10% for repairs and maintenance. If you plan to use a property manager, don't forget to include their monthly fee (typically 8-10% of gross rent).
function calculateRentalROI() {
var price = parseFloat(document.getElementById('purchasePrice').value);
var down = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('interestRate').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var taxes = parseFloat(document.getElementById('propertyTaxes').value);
var insurance = parseFloat(document.getElementById('insurance').value);
if (isNaN(price) || isNaN(down) || isNaN(rate) || isNaN(rent)) {
alert("Please enter valid numerical values.");
return;
}
// Mortgage Calculation (30-year fixed)
var loanAmount = price – down;
var monthlyRate = (rate / 100) / 12;
var numberOfPayments = 360;
var mortgage = 0;
if (rate > 0) {
mortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
mortgage = loanAmount / numberOfPayments;
}
// Operating Expenses
var monthlyTaxes = taxes / 12;
var monthlyInsurance = insurance / 12;
var maintenanceEstimate = (price * 0.01) / 12; // 1% rule for annual maintenance
var totalMonthlyExpenses = mortgage + monthlyTaxes + monthlyInsurance + maintenanceEstimate;
var cashFlow = rent – totalMonthlyExpenses;
// Annualized Metrics
var annualCashFlow = cashFlow * 12;
var netOperatingIncome = (rent * 12) – (taxes + insurance + (maintenanceEstimate * 12));
var capRate = (netOperatingIncome / price) * 100;
var cocReturn = (annualCashFlow / down) * 100;
// Display results
document.getElementById('resMortgage').innerText = "$" + mortgage.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCashFlow').innerText = "$" + cashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
document.getElementById('resCoC').innerText = cocReturn.toFixed(2) + "%";
document.getElementById('roiResults').style.display = 'block';
}