Rental Property ROI Calculator
Total Investment:
$0
Monthly Operating Expenses:
$0
Monthly Cash Flow:
$0
Annual Net Operating Income (NOI):
$0
Cap Rate:
0%
Cash-on-Cash Return:
0%
How to Use the Rental Property ROI Calculator
Calculating the potential Return on Investment (ROI) is the most critical step for any real estate investor. This calculator helps you determine if a property will generate positive cash flow or if it will become a "money pit." To get the most accurate results, ensure you include all hidden costs like closing fees and a realistic maintenance buffer.
Key Metrics Explained
- Total Investment: This is the total "all-in" cash required to get the property rent-ready, including the purchase price, closing costs, and immediate repairs.
- 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 widely considered one of the most important metrics for rental property analysis.
- Monthly Cash Flow: The amount of money left over every month after all operating expenses (taxes, insurance, management, and maintenance) have been paid.
Example Calculation
Imagine you buy a duplex for $250,000. You spend $5,000 on closing and $10,000 on new flooring and paint. Your total investment is $265,000.
If the property rents for $2,200 per month and your total expenses (including taxes, insurance, and management) come to $850 per month, your monthly cash flow is $1,350. This results in an annual NOI of $16,200 and a Cash-on-Cash return of approximately 6.11%.
Strategies to Improve Your ROI
Investors can improve their ROI by increasing rent through value-add renovations, reducing turnover rates, or self-managing the property to save on the 8-10% property management fee. However, always ensure you have a "Vacancy Factor" (usually 5-10%) built into your calculations to account for months when the unit might be empty.