function calculateRentalROI() {
var price = parseFloat(document.getElementById('propPrice').value);
var dpPercent = parseFloat(document.getElementById('downPercent').value);
var annualRate = parseFloat(document.getElementById('intRate').value);
var termYears = parseFloat(document.getElementById('loanTerm').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var tax = parseFloat(document.getElementById('annualTax').value);
var ins = parseFloat(document.getElementById('monthlyIns').value);
var maintPerc = parseFloat(document.getElementById('maintReserve').value);
if (isNaN(price) || isNaN(dpPercent) || isNaN(rent)) {
alert("Please enter valid numeric values for property price, down payment, and rent.");
return;
}
var downPayment = price * (dpPercent / 100);
var loanAmount = price – downPayment;
var monthlyRate = (annualRate / 100) / 12;
var numPayments = termYears * 12;
var monthlyMortgage = 0;
if (annualRate > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
monthlyMortgage = loanAmount / numPayments;
}
var monthlyTax = tax / 12;
var monthlyMaint = (rent * maintPerc) / 100;
var totalMonthlyExpenses = monthlyMortgage + monthlyTax + ins + monthlyMaint;
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
var roi = (annualCashFlow / downPayment) * 100;
document.getElementById('resMortgage').innerText = "$" + monthlyMortgage.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resExpenses').innerText = "$" + totalMonthlyExpenses.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCashFlow').innerText = "$" + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resAnnualCash').innerText = "$" + annualCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resDownPay').innerText = "$" + downPayment.toLocaleString();
document.getElementById('resROI').innerText = roi.toFixed(2) + "%";
document.getElementById('results-area').style.display = 'block';
}
How to Calculate Rental Property ROI
Understanding the potential return on investment (ROI) is the most critical step for any real estate investor. Before purchasing a rental property, you must determine if the monthly income will cover all operating expenses and provide a healthy profit margin.
Key Metrics Explained
Cash-on-Cash Return: This measures the annual cash flow relative to the actual cash you invested (down payment). It is one of the most accurate measures of investment performance.
Monthly Cash Flow: The net profit left over after every single expense—including mortgage, taxes, insurance, and maintenance—has been paid.
Maintenance Reserve: Savvy investors always set aside 10-15% of gross rent for future repairs. Ignoring this will lead to "phantom" profits that disappear when a water heater breaks.
Example ROI Calculation
Imagine you buy a property for $300,000 with 20% down ($60,000). If your total monthly expenses (mortgage, tax, insurance, maintenance) are $2,100 and you rent the home for $2,600, your monthly cash flow is $500.
Your annual cash flow would be $6,000. To find the ROI: ($6,000 / $60,000) = 10% ROI. Generally, real estate investors aim for a cash-on-cash return of 8% to 12% depending on the market and risk level.
Factors That Influence Your Return
Interest Rates: A 1% increase in interest rates can significantly decrease your monthly cash flow.
Property Taxes: These vary wildly by state and county. Always check the local assessor's data rather than relying on listing estimates.
Vacancy Rate: This calculator assumes 100% occupancy. In reality, you should factor in a 5% vacancy rate (about 2-3 weeks per year) for a more conservative estimate.