function calculateRentalROI() {
// Get Input Values
var price = parseFloat(document.getElementById('propPrice').value) || 0;
var downPerc = parseFloat(document.getElementById('downPayment').value) || 0;
var interest = parseFloat(document.getElementById('interestRate').value) || 0;
var years = parseFloat(document.getElementById('loanTerm').value) || 0;
var closing = parseFloat(document.getElementById('closingCosts').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var taxYear = parseFloat(document.getElementById('annualTaxes').value) || 0;
var insYear = parseFloat(document.getElementById('annualInsurance').value) || 0;
var hoaMonth = parseFloat(document.getElementById('monthlyHOA').value) || 0;
// Mortgage Calculation
var downPaymentAmt = price * (downPerc / 100);
var loanAmount = price – downPaymentAmt;
var monthlyRate = (interest / 100) / 12;
var numPayments = years * 12;
var monthlyPI = 0;
if (interest > 0) {
monthlyPI = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
monthlyPI = loanAmount / numPayments;
}
// Expense Calculation
var monthlyTax = taxYear / 12;
var monthlyIns = insYear / 12;
var totalMonthlyExpenses = monthlyPI + monthlyTax + monthlyIns + hoaMonth;
// Cash Flow
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// ROI Calculation
var totalCashInvested = downPaymentAmt + closing;
var cocRoi = 0;
if (totalCashInvested > 0) {
cocRoi = (annualCashFlow / totalCashInvested) * 100;
}
// Formatter
var fmtMoney = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
var fmtPerc = new Intl.NumberFormat('en-US', { style: 'percent', minimumFractionDigits: 2, maximumFractionDigits: 2 });
// Display Results
var elCashFlow = document.getElementById('resCashFlow');
elCashFlow.innerText = fmtMoney.format(monthlyCashFlow);
if (monthlyCashFlow < 0) { elCashFlow.classList.add('negative'); } else { elCashFlow.classList.remove('negative'); }
var elCoc = document.getElementById('resCoc');
elCoc.innerText = fmtPerc.format(cocRoi / 100);
if (cocRoi < 0) { elCoc.classList.add('negative'); } else { elCoc.classList.remove('negative'); }
document.getElementById('resMortgage').innerText = fmtMoney.format(monthlyPI);
document.getElementById('resCashNeeded').innerText = fmtMoney.format(totalCashInvested);
var elAnnual = document.getElementById('resAnnualProfit');
elAnnual.innerText = fmtMoney.format(annualCashFlow);
if (annualCashFlow < 0) { elAnnual.classList.add('negative'); } else { elAnnual.classList.remove('negative'); }
// Show Results Section
document.getElementById('resultsArea').style.display = 'block';
}
How to Analyze a Rental Property Investment
Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property and renting it out doesn't guarantee a profit. Successful investors rely on accurate data and specific metrics to determine if a deal is worth their capital. This Rental Property Cash Flow Calculator helps you break down the numbers to see the true potential of an investment.
Understanding Cash on Cash Return (CoC ROI)
Cash on Cash Return is arguably the most important metric for rental property investors. Unlike a standard Return on Investment (ROI) which might look at the total value of the asset, CoC ROI measures the annual return on the actual cash you invested.
The formula is:
Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) × 100%
For example, if you put down $50,000 to buy a house and it generates $5,000 in net profit per year, your Cash on Cash return is 10%. This allows you to compare real estate returns directly against other investments like stocks or bonds.
Key Metrics Explained
Monthly Cash Flow: The money left over after all expenses (mortgage, taxes, insurance, HOA) are paid. Positive cash flow is essential for a sustainable investment.
Total Cash Needed: This includes your down payment plus closing costs. Many beginners forget to factor in closing costs, which can significantly alter the ROI calculation.
NOI (Net Operating Income): While not explicitly displayed in the summary, our calculator derives cash flow from your NOI minus debt service. It represents the profitability of the property irrespective of financing.
Example Scenario: The 1% Rule
A common "rule of thumb" in real estate is the 1% rule, which suggests that the monthly rent should be at least 1% of the purchase price. Let's see how that looks in our calculator:
Purchase Price: $200,000
Target Rent: $2,000 (1%)
Down Payment: 20% ($40,000)
If you input these numbers along with standard expenses (e.g., $4,000/year taxes, $1,000/year insurance), you will typically see a very strong double-digit Cash on Cash return. However, in high-cost-of-living areas, meeting the 1% rule is difficult, and investors may settle for lower cash flow in exchange for higher property appreciation.
Why Cash Flow Matters More Than Appreciation
While property values tend to rise over time (appreciation), banking solely on appreciation is speculative. Cash flow is factual. It is the income you can spend today. A property with positive cash flow pays for itself and provides a buffer against market downturns. If a property has negative cash flow, you are essentially paying monthly to own it, which increases your financial risk.