Calculate Closing Costs

Investment Analysis Results

Total Capital Invested: $0

Monthly Net Cash Flow: $0

Annual Net Cash Flow: $0

Cash-on-Cash ROI: 0%

function calculateRentalROI() { var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0; var repairCosts = parseFloat(document.getElementById('repairCosts').value) || 0; var monthlyRent = parseFloat(document.getElementById('monthlyRent').value) || 0; var monthlyExpenses = parseFloat(document.getElementById('monthlyExpenses').value) || 0; var totalInvestment = purchasePrice + repairCosts; var monthlyCashFlow = monthlyRent – monthlyExpenses; var annualCashFlow = monthlyCashFlow * 12; var roiPercentage = 0; if (totalInvestment > 0) { roiPercentage = (annualCashFlow / totalInvestment) * 100; } document.getElementById('totalInvestmentResult').innerText = '$' + totalInvestment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('monthlyCashFlowResult').innerText = '$' + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('annualCashFlowResult').innerText = '$' + annualCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('roiPercentageResult').innerText = roiPercentage.toFixed(2) + '%'; document.getElementById('roiResults').style.display = 'block'; }

Understanding Rental Property ROI

Return on Investment (ROI) is the most critical metric for real estate investors. It measures the efficiency of an investment or compares the efficiencies of several different investments. In rental real estate, we specifically look at the Cash-on-Cash Return, which compares the annual pre-tax cash flow to the total amount of cash invested.

How to Calculate Rental ROI

The formula for calculating rental ROI is straightforward but requires accurate data entry. You take your annual net cash flow and divide it by your total out-of-pocket investment:

ROI = (Annual Net Cash Flow / Total Investment) x 100

What is a Good Rental ROI?

While "good" is subjective and depends on the market, many seasoned investors aim for the following benchmarks:

• 5% – 8%: Considered a safe, stable return in high-appreciation urban markets.
• 8% – 12%: The "sweet spot" for many residential investors in suburban areas.
• 15%+: Excellent returns, often found in emerging markets or through high-value-add strategies.

Factors That Impact Your ROI

Several variables can shift your return significantly:

1. Operating Expenses: These include property taxes, insurance, maintenance, and vacancy rates. Typically, these account for 35% to 50% of the gross income.
2. CapEx (Capital Expenditures): Large, infrequent expenses like a new roof or HVAC system must be budgeted for.
3. Property Management: If you hire a professional manager, they typically charge 8% to 12% of the monthly rent.
4. Financing: While this calculator focuses on total cash investment, using a mortgage (leverage) can often increase your ROI percentage because you are using less of your own money to control the asset.

Practical Example

Imagine you buy a duplex for $300,000. You spend $20,000 on new flooring and paint (Total Investment: $320,000). You rent both units for a total of $3,000 per month. After paying $1,200 in monthly expenses (taxes, insurance, repairs), your monthly cash flow is $1,800.

Your annual cash flow is $21,600. Your ROI would be ($21,600 / $320,000) = 6.75%.