Rental Property ROI Calculator
Analyze your potential real estate investment returns instantly.
Monthly Mortgage (P&I):
Total Monthly Expenses:
Monthly Cash Flow:
Annual Net Operating Income (NOI):
Cap Rate:
Cash on Cash Return:
Understanding Rental Property ROI
Investing in real estate is one of the most proven ways to build long-term wealth. However, the difference between a "good deal" and a "money pit" often comes down to the math. Our Rental Property ROI Calculator helps you strip away the emotion and look at the cold, hard numbers.
Key Metrics for Real Estate Investors
- Net Operating Income (NOI): This is the total income generated by the property minus all necessary operating expenses (excluding mortgage payments). It tells you how much cash the property generates on its own.
- Cap Rate: Short for Capitalization Rate, this is the NOI divided by the purchase price. It allows you to compare different properties regardless of how they are financed.
- Cash flow: This is the amount of money you have left over at the end of the month after paying every expense, including the mortgage. Positive cash flow is vital for sustainability.
- Cash-on-Cash Return: This measures the annual return on the actual cash you invested (your down payment and closing costs). It is often considered the most important metric for "active" investors.
Example Calculation
Imagine you buy a property for $250,000 with a $50,000 down payment. If your monthly rent is $2,200 and your total expenses (including mortgage, taxes, and maintenance) are $1,850, your monthly cash flow is $350. Annually, that's $4,200. Your Cash-on-Cash return would be $4,200 / $50,000 = 8.4%.
Why Maintenance and Vacancy Matter
Many novice investors forget to budget for things that haven't happened yet. A roof will eventually leak, and a tenant will eventually move out. We recommend setting aside at least 10% of your gross rent for Maintenance and Capital Expenditures (CapEx) and factoring in a 5-8% vacancy rate to ensure your ROI projections are realistic.