Investment Property ROI Calculator
Evaluate the profitability of your next real estate investment with precision.
Acquisition Costs
Income & Operating Expenses
Financial Performance Summary
How to Calculate ROI on Investment Property
Investing in real estate is one of the most proven ways to build wealth, but not every property is a winner. To determine if a rental property is a sound financial decision, you need to look beyond the surface level "gross rent" and dive into the specific metrics that define profitability. This Investment Property ROI Calculator helps you analyze the numbers that matter most.
Understanding Key Real Estate Metrics
- Cash-on-Cash Return (CoC ROI): This is the most critical metric for rental property investors. It measures the annual cash flow relative to the actual amount of "cash out of pocket" you spent to acquire the property (down payment, closing costs, and repairs).
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated by dividing the Net Operating Income (NOI) by the purchase price.
- Net Operating Income (NOI): This is your total annual income minus all operating expenses (taxes, insurance, maintenance), excluding mortgage payments.
- Monthly Cash Flow: The "pure profit" left over every month after all bills—including the mortgage—have been paid.
Realistic ROI Example:
Imagine you buy a duplex for $300,000. You put 20% down ($60,000), pay $6,000 in closing costs, and spend $4,000 on paint and carpets. Your total cash invested is $70,000.
If the monthly rent is $2,800 and all expenses (including the mortgage) total $2,200, your monthly cash flow is $600. Your annual cash flow is $7,200.
ROI Calculation: $7,200 / $70,000 = 10.28% Cash-on-Cash ROI.
The Formula for ROI in Real Estate
The standard formula used in this calculator for Cash-on-Cash Return is:
ROI = (Annual Net Cash Flow / Total Cash Invested) x 100
Where "Total Cash Invested" includes your down payment, closing costs, and initial renovation budget. This is more accurate than simple ROI because it reflects the actual liquidity you are using to generate the return.
Factors That Influence Your Return
When using the calculator, keep in mind that variables can change. Property taxes often increase after a sale, and maintenance is rarely a flat monthly fee. It is wise to budget 5-10% of gross rent for maintenance and 5-10% for potential vacancies. By being conservative with your expense estimates, you ensure that the calculated ROI is a "worst-case" or "realistic" scenario rather than a "best-case" fantasy.