Rental Property ROI Calculator
Purchase Info
Income & Expenses
Investment Analysis
Cash on Cash Return (COC):
0.00%
Cap Rate:
0.00%
Monthly Cash Flow:
0.00
Annual Cash Flow:
0.00
Net Operating Income (NOI):
0.00
Total Initial Investment:
0.00
Monthly Mortgage Payment:
0.00
Understanding Rental Property ROI
Investing in real estate is a powerful way to build wealth, but simply buying a property doesn't guarantee a profit. To succeed, you must accurately calculate your **Return on Investment (ROI)**. This Rental Property ROI Calculator helps investors analyze the profitability of a potential real estate deal by factoring in income, operating expenses, and financing costs.
Key Metrics Explained
- Cash on Cash Return (CoC): This is arguably the most important metric for rental investors. It measures the annual cash income earned on the cash you actually invested (down payment + closing costs). A CoC return of 8-12% is generally considered good in many markets.
- Cap Rate (Capitalization Rate): This measures the natural rate of return of the property regardless of debt. It is calculated by dividing the Net Operating Income (NOI) by the purchase price. It helps compare properties as if they were bought with all cash.
- Net Operating Income (NOI): This is your total income (Rent – Vacancy) minus all operating expenses (Tax, Insurance, Maintenance, HOA). It does not include mortgage payments.
- Cash Flow: The net amount of money moving in or out of the business after all expenses and debt service are paid. Positive cash flow ensures the property pays for itself.
Example Calculation
Imagine you purchase a property for $250,000. You put 20% down ($50,000) and pay $5,000 in closing costs. Your total cash invested is $55,000.
If your annual Net Operating Income (NOI) is $15,000 and your annual mortgage payments total $10,000, your annual cash flow is $5,000.
Your Cash on Cash Return would be: ($5,000 / $55,000) × 100 = 9.09%.
Why Use a Calculator?
Real estate expenses are often underestimated. Beginners frequently forget to account for vacancy rates (periods where the unit is empty) and maintenance reserves. This calculator forces you to input these variables, providing a realistic view of the property's potential performance before you sign any contracts.