Rental Property ROI Calculator
Purchase Information
Loan Details
Monthly Income & Expenses
(Tax, Insurance, HOA, Maint.)
Total Initial Cash Invested:
$0.00
Monthly Mortgage Payment (P&I):
$0.00
Monthly Cash Flow:
$0.00
Annual Cash Flow:
$0.00
Net Operating Income (Annual):
$0.00
Cap Rate:
0.00%
Cash on Cash Return:
0.00%
Mastering Your Rental Property Investment Analysis
Investing in real estate is one of the most reliable ways to build wealth, but the difference between a profitable asset and a money pit often comes down to the math. This Rental Property ROI Calculator is designed to help investors specifically analyze the viability of a potential rental unit by calculating key metrics like Cash Flow, Cap Rate, and Cash on Cash Return.
Understanding the Key Metrics
When evaluating a rental property, you shouldn't rely on a single number. This calculator provides a comprehensive breakdown:
- Cash on Cash Return (CoC): This is arguably the most important metric for investors using leverage (loans). It measures the annual cash return on the actual cash you invested (down payment + closing costs + rehab). A CoC of 8-12% is generally considered good in many markets.
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return assuming you bought it with all cash. It helps compare properties regardless of financing. Calculated as Net Operating Income / Purchase Price.
- Monthly Cash Flow: The net profit you pocket every month after all expenses and mortgage payments are made. Positive cash flow is essential for long-term sustainability.
Pro Tip: Don't underestimate your expenses. When entering "Total Monthly Expenses," ensure you account for Property Taxes, Landlord Insurance, HOA fees, Vacancy reserves (usually 5-10% of rent), and Maintenance reserves (5-10% of rent).
Example Calculation: Is it a Good Deal?
Let's consider a realistic scenario to see how the numbers work:
Imagine you are buying a single-family home for $250,000. You put 20% down ($50,000) and pay $5,000 in closing costs. Your total cash invested is $55,000.
You secure a loan at 6.5% interest for 30 years. The house rents for $2,200/month, and your total operating expenses (taxes, insurance, maintenance) average $800/month.
Using the calculator above, you would find:
- Mortgage Payment: Approx. $1,264/month
- Cash Flow: $2,200 (Rent) – $800 (Exp) – $1,264 (Mortgage) = $136/month
- Cash on Cash Return: ($136 * 12) / $55,000 = 2.9%
In this specific example, a 2.9% return might be considered low for a rental property, suggesting you might need to negotiate a lower price or find a property with higher rent potential.
Why Cash on Cash Matters More Than Cap Rate
While Cap Rate is excellent for valuing a building, Cash on Cash Return tells you how hard your specific dollars are working. If you can earn 5% in a high-yield savings account with zero risk, your real estate investment should ideally offer a significantly higher Cash on Cash return to justify the effort and risk involved in being a landlord.