Rental Property ROI Calculator
Analyze the potential cash flow and return on investment (ROI) for your real estate rental properties.
Purchase Information
Income & Expenses
Investment Analysis
Monthly Expense Breakdown
Understanding Rental Property Investment Metrics
Investing in rental properties is a proven strategy for building long-term wealth, but success relies heavily on the numbers. This calculator helps investors analyze the profitability of a potential deal by breaking down the most critical metrics: Cash Flow, Cash on Cash Return, and Cap Rate.
1. Monthly Cash Flow
Cash flow is the profit you bring in each month after all operating expenses and mortgage payments are made. It is calculated as:
Gross Rent – (Mortgage + Taxes + Insurance + HOA + Maintenance + Vacancy)
Positive cash flow ensures the property pays for itself and provides passive income. Most investors aim for at least $100-$300 per door in monthly positive cash flow.
2. Cash on Cash ROI
Cash on Cash Return measures the annual return on the actual cash you invested, rather than the total loan amount. It tells you how hard your money is working.
Formula: (Annual Cash Flow / Total Cash Invested) x 100
The "Total Cash Invested" includes your down payment, closing costs, and any immediate renovation costs. A Cash on Cash return of 8-12% is often considered a good target for residential rentals.
3. Capitalization Rate (Cap Rate)
The Cap Rate indicates the rate of return on a property assuming it was purchased entirely with cash. It is useful for comparing the profitability of different properties regardless of financing.
Formula: (Net Operating Income / Purchase Price) x 100
Note that Net Operating Income (NOI) includes income minus operating expenses, but excludes mortgage payments.
Why Factor in Vacancy and Maintenance?
Novice investors often make the mistake of calculating returns based solely on Rent minus Mortgage. However, real life happens. Tenants move out (Vacancy), and toilets break (Maintenance). This calculator allows you to set aside a percentage of monthly rent (typically 5-10%) for these inevitable costs to give you a realistic view of your true bottom line.