Mortgage Payment Calculator Td Canada

Real Estate ROI & Cap Rate Calculator

function calculateROI() { var purchasePrice = parseFloat(document.getElementById('purchasePrice').value); var initialCosts = parseFloat(document.getElementById('initialCosts').value) || 0; var monthlyRent = parseFloat(document.getElementById('monthlyRent').value); var monthlyExpenses = parseFloat(document.getElementById('monthlyExpenses').value) || 0; if (isNaN(purchasePrice) || isNaN(monthlyRent) || purchasePrice <= 0) { alert("Please enter valid numbers for Purchase Price and Monthly Rent."); return; } var annualIncome = monthlyRent * 12; var annualExpenses = monthlyExpenses * 12; var annualNOI = annualIncome – annualExpenses; var totalInvestment = purchasePrice + initialCosts; var capRate = (annualNOI / purchasePrice) * 100; var cashOnCash = (annualNOI / totalInvestment) * 100; document.getElementById('annualNOI').innerText = "$" + annualNOI.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('capRate').innerText = capRate.toFixed(2) + "%"; document.getElementById('totalROI').innerText = cashOnCash.toFixed(2) + "%"; document.getElementById('results').style.display = 'block'; }

Understanding Real Estate Investment Math: Cap Rate vs. ROI

For real estate investors, understanding the profitability of a property before signing the deed is critical. Two of the most important metrics used in the industry are the Cap Rate (Capitalization Rate) and Cash-on-Cash Return (ROI). While they seem similar, they serve different purposes in evaluating a deal.

What is the Cap Rate?

The Cap Rate is used to estimate the potential return on an investment property without considering financing (debt). It is essentially the ratio of the Net Operating Income (NOI) to the property's purchase price. It is the gold standard for comparing similar properties in the same market.

• Formula: (Annual Net Operating Income / Purchase Price) x 100
• Purpose: Evaluates the property's intrinsic value and risk relative to the market.

What is Net Operating Income (NOI)?

NOI is the total income generated by a property (rent, parking fees, laundry) minus all necessary operating expenses. Operating expenses include property taxes, insurance, maintenance, property management fees, and utilities. Crucially, NOI does not include mortgage payments or capital expenditures like a new roof.

ROI (Cash-on-Cash Return)

Unlike the Cap Rate, Cash-on-Cash Return accounts for the total cash you actually spent to get the property running. This includes the purchase price, closing costs, and immediate repairs or renovations. It tells you how much money you are making on the actual cash you "stuck" in the deal.

Investment Example: A Real-World Scenario

Imagine you find a duplex with the following numbers:

• Purchase Price: $300,000
• Renovation & Closing: $20,000
• Monthly Rent: $2,800 ($33,600/year)
• Monthly Expenses: $800 ($9,600/year)

Step 1: Calculate NOI. $33,600 – $9,600 = $24,000.

Step 2: Calculate Cap Rate. ($24,000 / $300,000) = 8.00%.

Step 3: Calculate ROI. ($24,000 / $320,000) = 7.50%.

What is a "Good" Return?

A "good" cap rate depends heavily on the location (market) and asset type. In high-demand cities like New York or San Francisco, cap rates might be as low as 3-4%. In smaller, emerging markets, investors often look for 7-10%. Generally, a higher cap rate indicates a higher potential return but also higher risk (e.g., older buildings or less stable neighborhoods).

How to Use This Calculator

1. Purchase Price: Enter the agreed-upon sale price of the property.
2. Initial Costs: Include loan origination fees, title insurance, and any immediate repairs needed to make the unit "rent-ready."
3. Monthly Rent: Use the actual rent if occupied, or conservative market estimates if vacant.
4. Monthly Expenses: Be honest! Include property tax (usually 1.2% of value/year), insurance, a 5-10% vacancy allowance, and a 10% maintenance reserve.