Rental Property ROI Calculator
Analyze your real estate investment potential in seconds.
Monthly Mortgage Payment:
$0.00
Monthly Cash Flow:
$0.00
Cap Rate:
0.00%
Cash on Cash Return:
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Understanding Your Rental Property ROI
Investing in real estate is one of the most proven ways to build long-term wealth, but the numbers must make sense. Before you sign a closing statement, you need to understand whether a property will be a "cash cow" or a "money pit." This calculator helps you break down the most critical metrics used by professional investors.
Key Real Estate Metrics Explained
- Cap Rate (Capitalization Rate): This measures the property's natural rate of return without considering financing. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price. A "good" cap rate usually falls between 5% and 10%, depending on the market.
- Cash on Cash Return: This is often considered the most important metric for investors using leverage (mortgages). It measures the annual cash flow relative to the actual cash you invested out of pocket (the down payment).
- Monthly Cash Flow: This is the "take-home" profit after every single expense—mortgage, taxes, insurance, and maintenance reserves—has been paid.
Example Calculation
Imagine you purchase a duplex for $300,000 with a 20% down payment ($60,000). At a 6.5% interest rate, your mortgage might be around $1,517. If the property rents for $2,500 and your taxes, insurance, and maintenance total $700, your monthly cash flow is approximately $283. Your Cash on Cash return would be roughly 5.6% annually.
Pro Tip: The 1% Rule
Many seasoned investors use the "1% Rule" as a quick screening tool. This rule suggests that a property should rent for at least 1% of its purchase price per month. For a $300,000 home, that would be $3,000 in rent. While harder to find in today's market, it remains a gold standard for high-yield cash flow.