Total Monthly Expenses:$0.00 (Includes P&I, Tax, Ins, HOA)
How to Analyze a Rental Property Investment
Investing in real estate is a powerful way to build wealth, but the numbers must make sense. Using a Rental Property ROI Calculator helps investors distinguish between a high-yield asset and a money pit. This guide explains the key metrics used in our calculator.
1. Net Operating Income (NOI)
NOI is the profitability of the property before adding in any debt service (mortgage). It is calculated by subtracting all operating expenses (taxes, insurance, HOA, maintenance) from the total income generated by the property.
Formula: NOI = Rental Income – Operating Expenses
2. Cap Rate (Capitalization Rate)
The Cap Rate measures the natural rate of return on the property as if you bought it with all cash. It is a crucial metric for comparing the value of different properties regardless of financing.
Calculation: (Annual NOI / Purchase Price) × 100
Good Target: Generally, a Cap Rate between 5% and 10% is considered healthy, though this varies by market.
3. Cash Flow
Cash flow is the net amount of money moving in or out of your pocket every month. Positive cash flow means the rent covers all expenses plus the mortgage, leaving profit. Negative cash flow means you are paying out of pocket to hold the property.
This is arguably the most important metric for investors using leverage (loans). It calculates the return on the actual cash you invested (Down Payment + Closing Costs).
Formula: (Annual Cash Flow / Total Cash Invested) × 100
Why Use a Calculator?
Real estate markets move fast. By estimating your mortgage payments, tax liabilities, and rental income upfront, you can make data-driven decisions. Always ensure you account for vacancy rates and maintenance reserves in your personal estimates to keep your investment safe.
function calculateROI() {
// Get Inputs
var price = parseFloat(document.getElementById('purchasePrice').value);
var down = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('interestRate').value);
var years = parseFloat(document.getElementById('loanTerm').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var tax = parseFloat(document.getElementById('annualTax').value);
var insurance = parseFloat(document.getElementById('annualInsurance').value);
var hoa = parseFloat(document.getElementById('monthlyHOA').value);
// Validation
if (isNaN(price) || isNaN(down) || isNaN(rate) || isNaN(years) || isNaN(rent)) {
alert("Please enter valid numbers for all fields.");
return;
}
// 1. Mortgage Calculation (Principal & Interest)
var loanAmount = price – down;
var monthlyRate = (rate / 100) / 12;
var numPayments = years * 12;
var mortgagePayment = 0;
if (rate === 0) {
mortgagePayment = loanAmount / numPayments;
} else {
mortgagePayment = loanAmount * monthlyRate * (Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
}
// 2. Monthly Expenses Breakdown
var monthlyTax = tax / 12;
var monthlyIns = insurance / 12;
// Total Operating Expenses (Exclude Mortgage) for NOI
var monthlyOpExp = monthlyTax + monthlyIns + hoa;
// Total Monthly Expenses (Include Mortgage) for Cash Flow
var totalMonthlyExpenses = mortgagePayment + monthlyOpExp;
// 3. Metrics Calculation
// Cash Flow
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// NOI (Net Operating Income) – Annual
var annualNOI = (rent * 12) – (monthlyOpExp * 12);
var monthlyNOI = annualNOI / 12;
// Cap Rate
var capRate = (annualNOI / price) * 100;
// Cash on Cash Return
// Assuming Cash Invested is just Down Payment for this simple calc (could add closing costs)
var cashInvested = down;
var cashOnCash = 0;
if (cashInvested > 0) {
cashOnCash = (annualCashFlow / cashInvested) * 100;
}
// 4. Update UI
document.getElementById('results').style.display = "block";
// Helper to format currency
var fmt = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
// Set Mortgage & Total Expenses
document.getElementById('resMortgage').innerText = fmt.format(mortgagePayment);
document.getElementById('resTotalExp').innerText = fmt.format(totalMonthlyExpenses);
// Set Main Metrics
var cfElem = document.getElementById('resCashFlow');
cfElem.innerText = fmt.format(monthlyCashFlow);
cfElem.className = "result-value " + (monthlyCashFlow >= 0 ? "positive" : "negative");
document.getElementById('resNOI').innerText = fmt.format(monthlyNOI);
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
var cocElem = document.getElementById('resCashOnCash');
cocElem.innerText = cashOnCash.toFixed(2) + "%";
cocElem.className = "result-value " + (cashOnCash >= 0 ? "positive" : "negative");
}