function calculateROI() {
// 1. Get Inputs and validate
var price = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPct = parseFloat(document.getElementById('downPayment').value) || 0;
var closing = parseFloat(document.getElementById('closingCosts').value) || 0;
var rate = parseFloat(document.getElementById('interestRate').value) || 0;
var term = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var vacancy = parseFloat(document.getElementById('vacancyRate').value) || 0;
var taxes = parseFloat(document.getElementById('annualTaxes').value) || 0;
var insurance = parseFloat(document.getElementById('annualInsurance').value) || 0;
var mgmt = parseFloat(document.getElementById('mgmtFee').value) || 0;
var maint = parseFloat(document.getElementById('maintenance').value) || 0;
// 2. Calculate Initial Cash Investment
var downPaymentAmount = price * (downPct / 100);
var loanAmount = price – downPaymentAmount;
var cashToClose = downPaymentAmount + closing;
// 3. Calculate Mortgage Payment (Monthly)
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var monthlyRate = rate / 100 / 12;
var numberOfPayments = term * 12;
var mortgagePayment = 0;
if (monthlyRate > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
mortgagePayment = loanAmount / numberOfPayments;
}
// 4. Calculate Operating Income
var vacancyLoss = rent * (vacancy / 100);
var effectiveGrossIncome = rent – vacancyLoss;
// 5. Calculate Operating Expenses (Monthly)
var monthlyTaxes = taxes / 12;
var monthlyInsurance = insurance / 12;
var monthlyMgmt = effectiveGrossIncome * (mgmt / 100);
var monthlyMaint = effectiveGrossIncome * (maint / 100);
var totalOperatingExpenses = monthlyTaxes + monthlyInsurance + monthlyMgmt + monthlyMaint;
// 6. Net Operating Income (NOI)
var monthlyNOI = effectiveGrossIncome – totalOperatingExpenses;
var annualNOI = monthlyNOI * 12;
// 7. Cash Flow
var totalMonthlyExpenses = totalOperatingExpenses + mortgagePayment;
var monthlyCashFlow = effectiveGrossIncome – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// 8. Returns
var capRate = (annualNOI / price) * 100;
var cashOnCash = (annualCashFlow / cashToClose) * 100;
// 9. Display Results
var resultArea = document.getElementById('resultsArea');
resultArea.style.display = 'block';
// Helper for formatting currency
var fmt = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
document.getElementById('resCashFlow').innerHTML = fmt.format(monthlyCashFlow);
document.getElementById('resCashFlow').className = monthlyCashFlow >= 0 ? "result-value" : "result-value negative";
document.getElementById('resCoC').innerHTML = cashOnCash.toFixed(2) + "%";
document.getElementById('resCoC').className = cashOnCash >= 0 ? "result-value" : "result-value negative";
document.getElementById('resCapRate').innerHTML = capRate.toFixed(2) + "%";
document.getElementById('resNOI').innerHTML = fmt.format(annualNOI); // NOI is usually annual
document.getElementById('resCashToClose').innerHTML = fmt.format(cashToClose);
document.getElementById('resTotalExp').innerHTML = fmt.format(totalMonthlyExpenses);
}
Understanding Rental Property ROI
Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property and renting it out doesn't guarantee a profit. To succeed, investors must analyze the numbers with precision. This Rental Property ROI Calculator is designed to help you analyze the profitability of a potential investment property by calculating key metrics like Cash Flow, Cap Rate, and Cash-on-Cash Return.
Why calculate ROI? Return on Investment (ROI) measures the efficiency of an investment. In real estate, it tells you how hard your money is working for you compared to other investment vehicles like stocks or bonds.
Key Metrics Explained
1. Cash Flow
Cash flow is the net amount of cash moving in and out of your investment business. It is calculated as:
Positive cash flow means the property pays for itself and puts money in your pocket every month. Negative cash flow means you are losing money to hold the property.
2. Cash-on-Cash Return (CoC)
While Cap Rate looks at the property's potential, Cash-on-Cash Return looks at your specific financial performance based on the cash you actually invested. It is calculated by dividing your annual pre-tax cash flow by the total cash invested (down payment + closing costs + rehab costs).
For example, if you invest $50,000 to buy a property and it generates $5,000 in annual cash flow, your CoC return is 10%. This is often considered the most important metric for investors using leverage (mortgages).
3. Cap Rate (Capitalization Rate)
The Cap Rate measures the natural rate of return of the property assuming you bought it in all cash. It is calculated as Net Operating Income (NOI) / Purchase Price.
Cap rate helps you compare properties irrespective of financing. A higher cap rate generally implies a better return but may come with higher risk (e.g., a property in a declining neighborhood).
How to Use This Calculator
To get the most accurate results, ensure you input realistic numbers for expenses. A common mistake new investors make is underestimating Vacancy (periods where the property sits empty) and Maintenance (saving for future repairs like a new roof or water heater).
A safe rule of thumb for conservative analysis is to allocate at least 5-10% of rent for vacancy and another 5-10% for maintenance/CapEx (Capital Expenditures).
Interpreting Your Results
Positive Cash Flow: Good. The property generates income.
CoC Return > 8-12%: Generally considered a solid return in real estate, outperforming the historical average of the stock market.
Negative Numbers: Red flag. Unless you are banking on massive appreciation, a property with negative cash flow is a liability, not an asset.