function calculateRentalROI() {
var price = parseFloat(document.getElementById('propPrice').value);
var downPct = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('intRate').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var exp = parseFloat(document.getElementById('monthlyExp').value);
if (isNaN(price) || isNaN(downPct) || isNaN(rate) || isNaN(rent) || isNaN(exp)) {
alert("Please fill in all fields with valid numbers.");
return;
}
var downAmt = price * (downPct / 100);
var loanAmt = price – downAmt;
var monthlyRate = (rate / 100) / 12;
var numPayments = 360; // Standard 30-year fixed
var monthlyMortgage = 0;
if (rate > 0) {
monthlyMortgage = (loanAmt * monthlyRate) / (1 – Math.pow(1 + monthlyRate, -numPayments));
} else {
monthlyMortgage = loanAmt / numPayments;
}
var monthlyCashFlow = rent – exp – monthlyMortgage;
var annualCashFlow = monthlyCashFlow * 12;
var annualNOI = (rent – exp) * 12;
var capRate = (annualNOI / price) * 100;
var cocReturn = (annualCashFlow / downAmt) * 100;
document.getElementById('resCashFlow').innerText = '$' + monthlyCashFlow.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';
}
Understanding Rental Property ROI: Cap Rate vs. Cash-on-Cash
Investing in real estate is one of the most proven ways to build wealth, but the success of an investment depends entirely on the numbers. Using a Rental Property ROI Calculator allows you to strip away emotion and evaluate a property based on its financial performance.
What is Cap Rate?
The Capitalization Rate (Cap Rate) measures the profitability of a property regardless of how it is financed. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price. For example, if a property priced at $300,000 generates an annual NOI of $18,000, the Cap Rate is 6%. This metric is ideal for comparing the inherent value of different properties in a specific market.
What is Cash-on-Cash Return?
While Cap Rate ignores financing, Cash-on-Cash (CoC) Return is all about how much your actual cash investment is working for you. It factors in your mortgage payments and down payment. If you put $60,000 down and your annual cash flow (after the mortgage) is $6,000, your Cash-on-Cash return is 10%. For most investors, this is the most critical metric for daily operations.
How to Improve Your ROI
Reduce Vacancy: High turnover is the biggest ROI killer. Keeping reliable tenants reduces marketing and repair costs.
Optimize Expenses: Regularly audit your property management fees, insurance premiums, and maintenance contracts.
Strategic Upgrades: Focus on improvements that increase monthly rent, such as updated kitchens or adding laundry facilities, rather than purely aesthetic changes.
Example Calculation
Suppose you purchase a duplex for $250,000 with a 20% down payment ($50,000). Your mortgage, taxes, and insurance come to $1,400 per month. If you collect $2,200 in rent and pay $200 in monthly maintenance, your monthly cash flow is $600. Your annual cash flow is $7,200, resulting in a 14.4% Cash-on-Cash return.