function calculateRentalROI() {
// Get inputs
var price = parseFloat(document.getElementById('rpcPrice').value) || 0;
var down = parseFloat(document.getElementById('rpcDown').value) || 0;
var rate = parseFloat(document.getElementById('rpcRate').value) || 0;
var term = parseFloat(document.getElementById('rpcTerm').value) || 0;
var rent = parseFloat(document.getElementById('rpcRent').value) || 0;
var vacancyRate = parseFloat(document.getElementById('rpcVacancy').value) || 0;
var tax = parseFloat(document.getElementById('rpcTax').value) || 0;
var insurance = parseFloat(document.getElementById('rpcInsurance').value) || 0;
var maintenance = parseFloat(document.getElementById('rpcMaintenance').value) || 0;
var management = parseFloat(document.getElementById('rpcManagement').value) || 0;
var hoa = parseFloat(document.getElementById('rpcHOA').value) || 0;
var capex = parseFloat(document.getElementById('rpcCapEx').value) || 0;
// Calculations
var loanAmount = price – down;
var monthlyRate = (rate / 100) / 12;
var numberOfPayments = term * 12;
// Mortgage P&I
var mortgage = 0;
if (loanAmount > 0 && monthlyRate > 0) {
mortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else if (loanAmount > 0 && rate === 0) {
mortgage = loanAmount / numberOfPayments;
}
// Income adjustments
var vacancyLoss = rent * (vacancyRate / 100);
var effectiveGrossIncome = rent – vacancyLoss;
// Operating Expenses (Monthly)
var monthlyTax = tax / 12;
var monthlyInsurance = insurance / 12;
var operatingExpenses = monthlyTax + monthlyInsurance + maintenance + management + hoa + capex;
// Totals
var totalExpenses = mortgage + operatingExpenses;
var monthlyCashFlow = effectiveGrossIncome – totalExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// Net Operating Income (Annual) = (Effective Income – Operating Expenses) * 12
// Note: NOI does NOT include mortgage payments
var monthlyNOI = effectiveGrossIncome – operatingExpenses;
var annualNOI = monthlyNOI * 12;
// Returns
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
var cocReturn = 0;
var totalInvestment = down; // Simplified: Assuming downpayment is total cash invested (ignoring closing costs for simplicity)
if (totalInvestment > 0) {
cocReturn = (annualCashFlow / totalInvestment) * 100;
}
// Formatting currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
// Update UI
document.getElementById('resMortgage').innerText = formatter.format(mortgage);
document.getElementById('resTotalExpenses').innerText = formatter.format(totalExpenses);
var cfElement = document.getElementById('resCashFlow');
cfElement.innerText = formatter.format(monthlyCashFlow);
if(monthlyCashFlow >= 0) {
cfElement.className = "rpc-result-value rpc-highlight";
} else {
cfElement.className = "rpc-result-value rpc-highlight-neg";
}
document.getElementById('resNOI').innerText = formatter.format(annualNOI);
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
var cocElement = document.getElementById('resCoC');
cocElement.innerText = cocReturn.toFixed(2) + "%";
if(cocReturn >= 0) {
cocElement.className = "rpc-result-value rpc-highlight";
} else {
cocElement.className = "rpc-result-value rpc-highlight-neg";
}
document.getElementById('rpcResults').style.display = 'block';
}
Understanding Rental Property Cash Flow
Calculating the potential return on a rental property investment is crucial for any real estate investor. While many properties may look attractive on the surface due to location or price, a detailed cash flow analysis reveals the true financial viability of the asset. This Rental Property Cash Flow Calculator helps you determine if a property will generate income (positive cash flow) or cost you money (negative cash flow) every month.
Why Cash Flow is King
Cash flow represents the net amount of cash moving in and out of your rental business. Positive cash flow means the property's income exceeds its expenses, providing you with passive income and a safety buffer for repairs. Negative cash flow implies that you must pay out of pocket to keep the property running, which increases your financial risk.
Experienced investors often prioritize Cash on Cash Return over simple appreciation. Appreciation (the increase in property value over time) is speculative, whereas cash flow is tangible income you can spend or reinvest today.
Key Metrics Explained
Net Operating Income (NOI)
NOI is a fundamental figure in real estate valuation. It is calculated by subtracting all necessary operating expenses from the revenue generated by the property. Crucially, NOI does not include mortgage payments (debt service). It strictly measures the profitability of the property itself, regardless of how it is financed.
Formula: Real Estate Revenue – Operating Expenses = NOI
Cap Rate (Capitalization Rate)
The Cap Rate is used to compare different real estate investments. It represents the rate of return on the property if you bought it in all cash. A higher cap rate generally indicates a higher return but may come with higher risks (e.g., a property in a declining neighborhood). In many stable markets, a cap rate between 4% and 8% is considered standard, though this varies heavily by location.
Formula: (Annual NOI / Purchase Price) x 100 = Cap Rate %
Cash on Cash Return (CoC)
This is arguably the most important metric for investors using financing (leverage). It measures the annual cash income earned on the cash you actually invested (down payment + closing costs). It tells you how hard your money is working for you.
Formula: (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100 = CoC Return %
Common Operating Expenses to Watch
Vacancy: You won't have a tenant 100% of the time. Budgeting 5-8% of the rent for vacancy ensures you aren't caught off guard during turnover periods.
Maintenance & Repairs: Even new homes break. Setting aside 5-10% of monthly rent creates a "sinking fund" for when the water heater fails or the roof needs patching.
Property Management: If you don't plan to be a landlord dealing with midnight calls, budget 8-10% for a professional management company.
CapEx (Capital Expenditures): These are big-ticket items like replacing a roof or HVAC system. While not monthly costs, they should be budgeted for monthly (e.g., $100-$200/month) to avoid massive capital calls later.
Strategies to Improve Cash Flow
If your calculation shows a negative or low cash flow, consider these strategies before walking away:
Increase Rent: Are current rents below market value? minor cosmetic upgrades can often justify a significant rent hike.
Decrease Expenses: Shop around for cheaper insurance, challenge property tax assessments, or manage the property yourself to save on management fees.
Adjust Financing: A larger down payment reduces the monthly mortgage, instantly improving cash flow. Alternatively, shopping for a lower interest rate or interest-only loan term can lower monthly obligations.
{
"@context": "https://schema.org",
"@type": "FAQPage",
"mainEntity": [{
"@type": "Question",
"name": "What is a good Cash on Cash return for a rental property?",
"acceptedAnswer": {
"@type": "Answer",
"text": "A good Cash on Cash return is subjective, but many investors aim for 8-12%. In highly competitive markets, 5-7% might be acceptable if appreciation potential is high. In riskier markets, investors may demand 15% or more."
}
}, {
"@type": "Question",
"name": "Does the 1% rule still apply?",
"acceptedAnswer": {
"@type": "Answer",
"text": "The 1% rule states that monthly rent should be at least 1% of the purchase price (e.g., $2,000 rent for a $200,000 house). While a good quick filter, it is becoming harder to find in high-cost areas. Investors should always run a full cash flow analysis rather than relying solely on rules of thumb."
}
}, {
"@type": "Question",
"name": "How do I calculate Net Operating Income (NOI)?",
"acceptedAnswer": {
"@type": "Answer",
"text": "To calculate NOI, take your total annual revenue (rent + other income) and subtract all operating expenses (taxes, insurance, maintenance, management, vacancy). Do not subtract mortgage payments."
}
}]
}