function calculateRentalROI() {
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPaymentPercent = parseFloat(document.getElementById('downPaymentPercent').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) / 100 / 12 || 0;
var closingCosts = parseFloat(document.getElementById('closingCosts').value) || 0;
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var monthlyExpenses = parseFloat(document.getElementById('monthlyExpenses').value) || 0;
// Math Logic
var downPaymentAmount = (downPaymentPercent / 100) * purchasePrice;
var loanAmount = purchasePrice – downPaymentAmount;
var totalInitialInvestment = downPaymentAmount + closingCosts;
// Mortgage Calculation (P&I)
var loanTermsMonths = 360; // Standard 30 year
var monthlyMortgage = 0;
if (interestRate > 0) {
monthlyMortgage = loanAmount * (interestRate * Math.pow(1 + interestRate, loanTermsMonths)) / (Math.pow(1 + interestRate, loanTermsMonths) – 1);
} else {
monthlyMortgage = loanAmount / loanTermsMonths;
}
var monthlyCashFlow = monthlyRent – monthlyExpenses – monthlyMortgage;
var annualCashFlow = monthlyCashFlow * 12;
var cashOnCashReturn = (annualCashFlow / totalInitialInvestment) * 100;
// NOI and Cap Rate
var annualRent = monthlyRent * 12;
var annualExpenses = monthlyExpenses * 12;
var netOperatingIncome = annualRent – annualExpenses;
var capRate = (netOperatingIncome / purchasePrice) * 100;
// Display results
document.getElementById('resultsArea').style.display = 'block';
document.getElementById('cashFlowResult').innerText = '$' + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('cocResult').innerText = cashOnCashReturn.toFixed(2) + '%';
document.getElementById('capRateResult').innerText = capRate.toFixed(2) + '%';
document.getElementById('totalOutlayResult').innerText = '$' + totalInitialInvestment.toLocaleString();
}
Understanding Your Real Estate ROI
Calculating the Return on Investment (ROI) is the most critical step for any property investor. Unlike stocks, real estate involves various costs including mortgage interest, property taxes, maintenance, and insurance. This calculator helps you determine if a property is a "cash cow" or a "money pit" by analyzing three key metrics.
Key Investment Metrics Explained
- Cash Flow: This is the net amount of money moving into your pocket each month after every single bill—including the mortgage—is paid. Positive cash flow is essential for long-term sustainability.
- Cash on Cash (CoC) Return: This measures the annual return on the actual money you outlaid (down payment and closing costs). Many investors aim for a CoC return of 8% to 12% or higher.
- Cap Rate: The Capitalization Rate shows the property's yield independent of financing. It helps you compare the value of different properties as if you were buying them with 100% cash.
Realistic Example Calculation
Imagine you purchase a duplex for $250,000. You put 20% down ($50,000) and pay $5,000 in closing costs, making your total investment $55,000. If the total monthly rent is $2,200 and your mortgage, taxes, and insurance total $1,800, your monthly cash flow is $400. This results in an annual cash flow of $4,800, giving you an 8.7% Cash on Cash return.
Tips for Improving Your ROI
To maximize your returns, consider "value-add" opportunities such as minor renovations that justify higher rent, or reducing operating expenses by appealing property tax assessments. Always include a "vacancy factor" of 5-10% in your manual planning to ensure your cash flow remains positive during tenant turnovers.