Please enter valid positive numbers for all fields.
Investment Analysis
Total Initial Investment (Cash Needed)
Monthly Mortgage Payment (P&I)
Total Monthly Expenses
Net Operating Income (NOI) / Year
Monthly Cash Flow
Cap Rate
Cash on Cash Return
function calculateROI() {
// 1. Get Input Values
var price = parseFloat(document.getElementById('purchasePrice').value);
var downPercent = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('interestRate').value);
var termYears = parseFloat(document.getElementById('loanTerm').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var vacancyPercent = parseFloat(document.getElementById('vacancyRate').value);
var annualTax = parseFloat(document.getElementById('propertyTax').value);
var annualIns = parseFloat(document.getElementById('insurance').value);
var maintPercent = parseFloat(document.getElementById('maintenance').value);
var otherMonthly = parseFloat(document.getElementById('otherCosts').value);
// Validation
if (isNaN(price) || isNaN(downPercent) || isNaN(rate) || isNaN(rent) || isNaN(annualTax)) {
document.getElementById('errorMsg').style.display = 'block';
document.getElementById('resultsBox').style.display = 'none';
return;
} else {
document.getElementById('errorMsg').style.display = 'none';
}
// 2. Loan Calculations
var downAmount = price * (downPercent / 100);
var loanAmount = price – downAmount;
var monthlyRate = rate / 100 / 12;
var numPayments = termYears * 12;
var monthlyMortgage = 0;
if (rate > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
monthlyMortgage = loanAmount / numPayments;
}
// 3. Expense Calculations (Monthly)
var monthlyTax = annualTax / 12;
var monthlyIns = annualIns / 12;
var monthlyVacancy = rent * (vacancyPercent / 100);
var monthlyMaint = rent * (maintPercent / 100);
// Total Operating Expenses (excluding mortgage)
var totalOperatingExpensesMonthly = monthlyTax + monthlyIns + monthlyVacancy + monthlyMaint + otherMonthly;
// Total Expenses (including mortgage)
var totalExpensesMonthly = totalOperatingExpensesMonthly + monthlyMortgage;
// 4. Income Calculations
// Effective Gross Income (Rent – Vacancy)
var effectiveIncome = rent – monthlyVacancy;
var monthlyCashFlow = rent – totalExpensesMonthly; // Simple cash flow calculation based on full rent minus all outflows
// Note: Some models subtract vacancy from rent first. Here we treat vacancy as an expense line item to balance against Gross Rent.
// Let's refine for clarity: Cash Flow = (Gross Rent) – (Vacancy + Maint + Tax + Ins + Other + Mortgage)
// Which matches the logic above.
// 5. Annual Metrics
var annualNOI = (rent * 12) – (totalOperatingExpensesMonthly * 12);
var annualCashFlow = monthlyCashFlow * 12;
// Cap Rate = (Annual NOI / Purchase Price) * 100
var capRate = (annualNOI / price) * 100;
// Cash on Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) * 100
// Assuming Closing Costs are roughly 2% of price for estimation + Down Payment
var closingCosts = price * 0.02;
var totalCashInvested = downAmount + closingCosts;
var cashOnCash = (annualCashFlow / totalCashInvested) * 100;
// 6. Display Results
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
document.getElementById('resInitialCash').innerHTML = formatter.format(totalCashInvested) + " (incl. est. 2% closing costs)";
document.getElementById('resMortgage').innerHTML = formatter.format(monthlyMortgage);
document.getElementById('resExpenses').innerHTML = formatter.format(totalExpensesMonthly);
document.getElementById('resNOI').innerHTML = formatter.format(annualNOI);
document.getElementById('resCashFlow').innerHTML = formatter.format(monthlyCashFlow);
document.getElementById('resCapRate').innerHTML = capRate.toFixed(2) + "%";
document.getElementById('resCoC').innerHTML = cashOnCash.toFixed(2) + "%";
// Logic to color code cash flow
if (monthlyCashFlow >= 0) {
document.getElementById('resCashFlow').style.color = '#27ae60';
} else {
document.getElementById('resCashFlow').style.color = '#e74c3c';
}
document.getElementById('resultsBox').style.display = 'block';
}
Understanding Rental Property ROI: A Guide for Investors
Real estate investing is one of the most reliable ways to build wealth, but it relies heavily on the numbers. Unlike stocks, where the market dictates value daily, rental properties perform based on specific metrics: Cash Flow, Cap Rate, and Cash on Cash Return. Use our Rental Property ROI Calculator above to analyze potential deals before you sign on the dotted line.
Key Metrics Explained
1. Monthly Cash Flow
Cash flow is the profit you take home each month after all expenses are paid. It is calculated as:
Positive cash flow ensures the property pays for itself and provides you with passive income. A common mistake for new investors is failing to account for "hidden" costs like vacancy (periods where the property sits empty) and maintenance reserves.
2. Capitalization Rate (Cap Rate)
The Cap Rate measures the natural rate of return on the property assuming you bought it in cash. It allows you to compare the profitability of one property against another, regardless of how they are financed.
Formula: Net Operating Income (NOI) / Purchase Price
Good Target: Generally, a Cap Rate between 5% and 10% is considered healthy, though this varies significantly by location.
3. Cash on Cash Return (CoC)
This is arguably the most important metric for investors using leverage (mortgages). It measures the return on the actual cash you invested (down payment + closing costs), rather than the total property value.
If you put $50,000 down and make $5,000 in positive cash flow per year, your Cash on Cash return is 10%. This is often higher than the Cap Rate because mortgages allow you to leverage the bank's money to increase your returns.
How to Estimate Expenses
When using the calculator, accuracy is key. Here are standard benchmarks used by experienced landlords:
Maintenance: Budget 10% of monthly rent for repairs, even on new homes.
Vacancy: Budget 5% to 8% (roughly 2-4 weeks of vacancy per year).
Property Management: If you don't plan to manage it yourself, add 10% to the "Other Costs" field.
Frequently Asked Questions
What is the 1% Rule?
The 1% rule is a quick screening tool suggesting that the monthly rent should be at least 1% of the purchase price. For example, a $200,000 house should rent for $2,000/month. While harder to find in today's market, properties meeting this rule usually offer strong cash flow.
Does this calculator include appreciation?
No. This calculator focuses on Cash Flow and operating returns. Appreciation (the increase in property value over time) is a bonus, but smart investors buy for cash flow and let appreciation be the "icing on the cake."