function calculateRentalROI() {
// 1. Get Values
var price = parseFloat(document.getElementById('propPrice').value);
var down = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('intRate').value);
var term = parseFloat(document.getElementById('loanTerm').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var expenses = parseFloat(document.getElementById('monthlyExp').value);
// 2. Validation
if (isNaN(price) || isNaN(down) || isNaN(rate) || isNaN(term) || isNaN(rent) || isNaN(expenses)) {
alert("Please fill in all fields with valid numbers.");
return;
}
// 3. Logic
var loanAmount = price – down;
var monthlyRate = (rate / 100) / 12;
var numPayments = term * 12;
// Mortgage Calculation Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var mortgagePayment = 0;
if (rate > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
mortgagePayment = loanAmount / numPayments;
}
var totalMonthlyOutflow = mortgagePayment + expenses;
var monthlyCashFlow = rent – totalMonthlyOutflow;
var annualCashFlow = monthlyCashFlow * 12;
// NOI = (Gross Income – Operating Expenses) * 12.
// Note: NOI excludes debt service (mortgage).
var annualNOI = (rent – expenses) * 12;
// Cap Rate = (NOI / Purchase Price) * 100
var capRate = (annualNOI / price) * 100;
// Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) * 100
// Simplified here to use Down Payment as Total Cash Invested
var cashOnCash = 0;
if (down > 0) {
cashOnCash = (annualCashFlow / down) * 100;
}
// 4. Update DOM
var fmtCurrency = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
document.getElementById('resMortgage').innerText = fmtCurrency.format(mortgagePayment);
var cfEl = document.getElementById('resCashFlow');
cfEl.innerText = fmtCurrency.format(monthlyCashFlow);
cfEl.className = monthlyCashFlow >= 0 ? 'roi-result-value roi-positive' : 'roi-result-value roi-negative';
var afEl = document.getElementById('resAnnualFlow');
afEl.innerText = fmtCurrency.format(annualCashFlow);
afEl.className = annualCashFlow >= 0 ? 'roi-result-value roi-positive' : 'roi-result-value roi-negative';
document.getElementById('resNOI').innerText = fmtCurrency.format(annualNOI);
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
var cocEl = document.getElementById('resCoC');
cocEl.innerText = cashOnCash.toFixed(2) + "%";
// Show results
document.getElementById('resultsArea').style.display = 'block';
}
Understanding Real Estate Investment Metrics
Investing in rental properties is one of the most reliable ways to build wealth, but simply buying a property doesn't guarantee a profit. To succeed, investors must analyze the numbers rigorously. This Rental Property Cash Flow Calculator helps you evaluate the potential profitability of an asset by looking at key metrics like Cash Flow, Cap Rate, and Cash-on-Cash Return.
1. What is Cash Flow?
Cash flow is the net amount of money moving in and out of a business. In real estate, it is calculated as:
Positive Cash Flow: You are making a profit every month after paying all bills. Negative Cash Flow: You are losing money every month to hold the property.
2. Cap Rate vs. Cash-on-Cash Return
New investors often confuse these two metrics, but they serve different purposes:
Cap Rate (Capitalization Rate): This measures the property's natural rate of return assuming you bought it in cash. It is calculated by dividing the Net Operating Income (NOI) by the Purchase Price. It helps compare the quality of the deal regardless of financing.
Cash-on-Cash Return: This measures the return on the actual cash you invested (down payment). Since most investors use leverage (mortgages), this is often a more realistic measure of how hard your money is working for you.
Realistic Example Scenario
Let's assume you are looking at a single-family home with the following numbers:
Using the calculator above, you would find that your mortgage payment is roughly $1,064. Your total expenses (Mortgage + Operating) are $1,564. This leaves you with a Monthly Cash Flow of $436, or $5,232 per year.
Your Cash-on-Cash return would be approximately 13.08% ($5,232 annual profit divided by $40,000 invested), which significantly outperforms most stock market averages.
Why Operating Expenses Matter
Many beginners make the mistake of only subtracting the mortgage from the rent. However, you must account for "Operating Expenses" such as:
Property Taxes
Landlord Insurance
Maintenance and Repairs (Budget 5-10% of rent)
Vacancy Rates (Budget 5-8% of rent)
Property Management Fees (typically 8-10%)
Failure to account for these can turn a seemingly profitable deal into a financial liability. Use the "Monthly Operating Expenses" field in the calculator to input a realistic estimate of these costs.