Rental Property ROI Calculator
Calculate Cap Rate, Cash-on-Cash Return, and Monthly Cash Flow for your investment property.
Understanding Your Rental Property Returns
Investing in real estate requires more than just looking at the monthly rent. To truly understand if a property is a good investment, you need to calculate key metrics like Cap Rate and Cash-on-Cash Return. This calculator helps you break down the numbers to see the real profit potential of a rental unit.
1. Monthly Cash Flow
Monthly cash flow is the amount of money left over after every single expense is paid. This includes your mortgage principal and interest, property taxes, insurance, HOA fees, and a buffer for maintenance and vacancy. A positive cash flow is essential for long-term sustainability.
2. Capitalization Rate (Cap Rate)
The Cap Rate is used to compare different real estate investments regardless of how they are financed. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price.
Formula: Cap Rate = (Annual NOI / Purchase Price) x 100
3. Cash-on-Cash Return (CoC)
This is often considered the most important metric for investors using leverage (mortgages). It measures the annual return on the actual cash you "out of pocket." It accounts for your down payment and closing costs.
Formula: CoC ROI = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100
Example Calculation
Imagine you buy a property for $300,000 with a 20% down payment ($60,000). Your closing costs are $9,000, making your total investment $69,000. If the property rents for $2,500 and your total expenses (including mortgage) are $1,900, your monthly cash flow is $600. Your annual cash flow is $7,200, resulting in a 10.43% Cash-on-Cash return.