Investing in real estate is a powerful way to build wealth, but simply buying a property and renting it out doesn't guarantee a profit. To be a successful investor, you must understand the numbers behind the deal. This Rental Property ROI (Return on Investment) Calculator helps you analyze potential deals by breaking down cash flow, capitalization rate (Cap Rate), and Cash on Cash return.
Key Metrics Explained
1. Cash Flow
Cash flow is the profit you bring in each month after all expenses are paid. It is calculated by taking your total income (rent) and subtracting all expenses, including the mortgage, taxes, insurance, vacancy provisions, and maintenance costs.
Positive cash flow is essential for long-term sustainability. It ensures the property pays for itself and provides you with passive income.
2. Cash on Cash Return (CoC)
This is arguably the most important metric for rental investors. It 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 for you.
For example, if you invest $50,000 (down payment + closing costs) and the property generates $5,000 in net positive cash flow per year, your Cash on Cash return is 10%.
3. Cap Rate (Capitalization Rate)
Cap Rate measures the property's natural rate of return assuming you paid for it essentially in cash (without a mortgage). It is calculated by dividing the Net Operating Income (NOI) by the property's purchase price. This helps compare the profitability of different properties regardless of how they are financed.
How to Use This Calculator
To get the most accurate results from the Rental Property ROI Calculator, ensure you input realistic numbers:
Monthly Expenses: Don't underestimate repairs! A common rule of thumb is to set aside 10-15% of rent for repairs and capital expenditures (CapEx). Also include property management fees if you aren't self-managing.
Vacancy Rate: No property is occupied 100% of the time. Use a standard 5% to 8% vacancy rate to create a safety buffer in your calculations.
Closing Costs: Remember that buying a property involves title fees, inspections, and loan origination fees, which increase your total cash invested.
What is a Good ROI for Rental Property?
While "good" is subjective, many investors aim for a Cash on Cash return of 8% to 12%. However, in high-appreciation markets, investors might accept a lower monthly cash flow (and lower CoC) in exchange for significant long-term property value growth. Conversely, in stable markets with low appreciation, investors typically demand higher immediate cash flow.
function calculateRentalROI() {
// 1. Get Inputs
var price = parseFloat(document.getElementById("purchasePrice").value);
var downPercent = parseFloat(document.getElementById("downPaymentPercent").value);
var rate = parseFloat(document.getElementById("interestRate").value);
var years = parseFloat(document.getElementById("loanTerm").value);
var rent = parseFloat(document.getElementById("monthlyRent").value);
var expenses = parseFloat(document.getElementById("monthlyExpenses").value);
var vacancyRate = parseFloat(document.getElementById("vacancyRate").value);
var closingCosts = parseFloat(document.getElementById("closingCosts").value);
// Validation to prevent NaN errors
if (isNaN(price) || isNaN(downPercent) || isNaN(rent) || isNaN(expenses)) {
alert("Please enter valid numbers in all fields.");
return;
}
// 2. Loan Calculations
var downPaymentAmount = price * (downPercent / 100);
var loanAmount = price – downPaymentAmount;
var monthlyRate = rate / 100 / 12;
var numberOfPayments = years * 12;
// Mortgage Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var monthlyMortgage = 0;
if (rate > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
monthlyMortgage = loanAmount / numberOfPayments;
}
// 3. Income & Expense Calculations
var vacancyLoss = rent * (vacancyRate / 100);
var effectiveGrossIncome = rent – vacancyLoss;
var totalMonthlyExpenses = expenses + monthlyMortgage;
// Net Operating Income (NOI) excludes mortgage payments
// NOI = (Gross Income – Vacancy – Operating Expenses) * 12
var monthlyNOI = effectiveGrossIncome – expenses;
var annualNOI = monthlyNOI * 12;
// 4. ROI Calculations
var monthlyCashFlow = effectiveGrossIncome – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
var totalCashInvested = downPaymentAmount + closingCosts;
// Cash on Cash Return = Annual Cash Flow / Total Cash Invested
var cashOnCash = 0;
if (totalCashInvested > 0) {
cashOnCash = (annualCashFlow / totalCashInvested) * 100;
}
// Cap Rate = Annual NOI / Purchase Price
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// 5. Display Results
document.getElementById("resCashFlow").innerHTML = formatCurrency(monthlyCashFlow);
document.getElementById("resCoC").innerHTML = cashOnCash.toFixed(2) + "%";
document.getElementById("resCapRate").innerHTML = capRate.toFixed(2) + "%";
document.getElementById("resMortgage").innerHTML = formatCurrency(monthlyMortgage);
document.getElementById("resNOI").innerHTML = formatCurrency(annualNOI);
document.getElementById("resTotalInvested").innerHTML = formatCurrency(totalCashInvested);
// Styling for negative cash flow
var cashFlowElement = document.getElementById("resCashFlow");
if (monthlyCashFlow < 0) {
cashFlowElement.classList.add("negative");
} else {
cashFlowElement.classList.remove("negative");
}
// Show results area
document.getElementById("results-area").style.display = "block";
}
function formatCurrency(num) {
return "$" + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}