Rental Property ROI Calculator
Calculate your potential cash flow, cap rate, and cash-on-cash return for any investment property.
Monthly Mortgage (P&I):
$0.00
Monthly Operating Expenses:
$0.00
Monthly Cash Flow:
$0.00
Cap Rate:
0.00%
Cash-on-Cash Return:
0.00%
Understanding Your Rental Property ROI
Investing in real estate requires a clear understanding of the numbers before you commit your capital. This Rental Property ROI Calculator helps you analyze properties by looking at three critical metrics: Cash Flow, Cap Rate, and Cash-on-Cash Return.
Key Metrics Explained
1. Monthly Cash Flow: This is the net amount of money moving into your bank account every month after all expenses and the mortgage have been paid. Positive cash flow is essential for long-term sustainability.
2. 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. It allows you to compare different properties on an apples-to-apples basis regardless of the loan type used.
3. Cash-on-Cash Return (CoC): This is arguably the most important metric for leveraged investors. It calculates the annual cash flow relative to the actual cash you invested (down payment + closing costs). If you put down $60,000 and get $6,000 back in annual cash flow, your CoC is 10%.
Realistic Investment Example:
A property costs $250,000. You put 20% down ($50,000) and pay $5,000 in closing costs (Total cash: $55,000).
If the rent is $2,200 and all expenses (mortgage, tax, insurance, repairs) total $1,800, your monthly cash flow is $400 ($4,800/year).
Your Cash-on-Cash Return would be 8.7%.
A property costs $250,000. You put 20% down ($50,000) and pay $5,000 in closing costs (Total cash: $55,000).
If the rent is $2,200 and all expenses (mortgage, tax, insurance, repairs) total $1,800, your monthly cash flow is $400 ($4,800/year).
Your Cash-on-Cash Return would be 8.7%.
Tips for Accurate Calculation
- Don't forget Vacancy: Even the best rentals aren't occupied 365 days a year. Always factor in at least 5% for vacancy.
- Maintenance Reserves: Older homes may require 10-15% of gross rent for maintenance, while newer ones may only need 5%.
- Property Management: If you plan to hire a manager, add 8-10% of the monthly rent to your expense calculation.