Rental Property ROI Calculator
Investment Summary
Monthly Mortgage:
$0.00
Monthly Cash Flow:
$0.00
Cap Rate:
0.00%
Cash on Cash ROI:
0.00%
Total Out-of-Pocket Initial Investment:
$0.00
Understanding Rental Property Return on Investment (ROI)
Investing in real estate is one of the most proven paths to wealth, but the difference between a "good deal" and a "money pit" lies in the numbers. To evaluate a potential rental property, you must look beyond the gross rent and understand your net profitability.
Key Metrics for Real Estate Investors
- Cash Flow: This is the amount of profit you have left at the end of the month after all operating expenses and mortgage payments have been made. Positive cash flow is essential for long-term sustainability.
- Cap Rate (Capitalization Rate): Calculated as Net Operating Income (NOI) divided by the Purchase Price. It allows you to compare different properties without considering mortgage financing.
- Cash on Cash Return: This is the annual pre-tax cash flow divided by the total amount of cash initially invested. It is widely considered the most important metric for rental investors using leverage.
Example Calculation
Let's look at a realistic scenario for a residential property:
Property Details:
- Purchase Price: $250,000
- Down Payment: $50,000 (20%)
- Closing Costs & Repairs: $7,500
- Total Cash Invested: $57,500
- Monthly Rent: $2,200
- Monthly Expenses (Tax, Insurance, HOA, Maintenance): $550
- Monthly Mortgage Payment: $1,264
- Monthly Cash Flow: $2,200 – ($550 + $1,264) = $386
- Annual Cash Flow: $4,632
- Cash on Cash ROI: ($4,632 / $57,500) = 8.05%
How to Use This Calculator
To get the most accurate results, ensure you include all hidden costs in your "Monthly Expenses" field. Investors typically budget 5-10% of the rent for maintenance and another 5-10% for potential vacancies. By analyzing the ROI before you buy, you can ensure your capital is working as hard as possible to build your net worth.