Rental Property ROI Calculator
Calculate your Cap Rate, Cash-on-Cash Return, and Monthly Cash Flow instantly.
Understanding Rental Property ROI
Investing in real estate is one of the most proven ways to build long-term wealth. However, to be a successful landlord, you must understand the math behind the deal. A rental property ROI calculator helps you strip away the emotion and look at the raw data.
Key Metrics Explained
1. Cap Rate (Capitalization Rate): This is the ratio of Net Operating Income (NOI) to the property purchase price. It assumes you bought the property in cash. It is the best metric for comparing the natural profitability of one property against another without financing bias.
2. Cash-on-Cash (CoC) Return: This is arguably the most important metric for leveraged investors. It measures the annual cash flow relative to the actual cash you invested (down payment and closing costs). If you put $60,000 down and make $6,000 in annual profit, your CoC return is 10%.
3. Monthly Cash Flow: This is what is left in your pocket after every single bill is paid, including the mortgage, taxes, insurance, and a buffer for repairs and vacancies.
Example Calculation
Imagine a property priced at $200,000 with a 20% down payment ($40,000). If the monthly rent is $2,000 and total expenses (including mortgage) are $1,600, your monthly cash flow is $400. Annually, that is $4,800. Your Cash-on-Cash return would be $4,800 divided by $40,000, resulting in a 12% return.
How to Improve Your ROI
- Reduce Vacancy: Even one month of vacancy can destroy your annual profit. Screen tenants thoroughly to ensure long-term stays.
- Value-Add Renovations: Upgrading kitchens or adding a bedroom can allow for significantly higher rent increases compared to the cost of the renovation.
- Refinance: If interest rates drop, refinancing your mortgage can lower your monthly expenses and instantly boost your cash flow.