function calculateRentalROI() {
// Get Input Values
var price = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPmt = parseFloat(document.getElementById('downPayment').value) || 0;
var closing = parseFloat(document.getElementById('closingCosts').value) || 0;
var rate = parseFloat(document.getElementById('interestRate').value) || 0;
var years = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var expenses = parseFloat(document.getElementById('monthlyExpenses').value) || 0;
// Validations
if (price <= 0 || downPmt < 0 || years 0) {
cashOnCash = (annualCashFlow / totalInitialInvestment) * 100;
}
// Cap Rate = Annual NOI / Purchase Price
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// Display Results
document.getElementById('displayMortgage').innerHTML = "$" + monthlyMortgage.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
var cashFlowElement = document.getElementById('displayCashFlow');
cashFlowElement.innerHTML = "$" + monthlyCashFlow.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Color coding for cash flow
if (monthlyCashFlow >= 0) {
cashFlowElement.style.color = "#27ae60";
} else {
cashFlowElement.style.color = "#c0392b";
}
document.getElementById('displayNOI').innerHTML = "$" + annualNOI.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayCapRate').innerHTML = capRate.toFixed(2) + "%";
document.getElementById('displayCoC').innerHTML = cashOnCash.toFixed(2) + "%";
// Show results section
document.getElementById('roiResults').style.display = "block";
}
Understanding Rental Property ROI
Investing in real estate is one of the most popular ways to build wealth, but not every property is a good deal. To ensure your investment is profitable, you must calculate the Return on Investment (ROI) accurately. This calculator helps investors evaluate the potential profitability of a rental property by looking at key metrics like Cash Flow, Cap Rate, and Cash on Cash Return.
Key Metrics Explained
1. Monthly Cash Flow
Cash flow is the net amount of cash moving in and out of a business. In real estate, it is calculated as:
Formula: Rental Income – (Mortgage Payment + Operating Expenses)
Positive cash flow means the property pays for itself and generates profit every month. Negative cash flow implies you are losing money to hold the property.
2. Capitalization Rate (Cap Rate)
The Cap Rate measures the natural rate of return on the property assuming it was bought with cash. It allows you to compare the profitability of different properties regardless of how they are financed.
Formula: Net Operating Income (NOI) / Purchase Price
A "good" Cap Rate varies by market, but generally, investors look for 5% to 10%.
3. Cash on Cash Return (CoC)
This is arguably the most important metric for leveraged investors. It measures the cash income earned on the cash invested.
Unlike Cap Rate, CoC takes your debt service (mortgage) into account. If you put $50,000 down and make $5,000 a year in profit after all expenses, your CoC is 10%.
What Should You Include in Expenses?
When using this calculator, ensure your "Monthly Expenses" input is comprehensive. Failing to account for costs is the #1 mistake new investors make. Always include:
Property Taxes: Usually 1-2% of property value annually.
Insurance: Landlord insurance policies.
Repairs & Maintenance: Budget 5-10% of rent for future repairs.
Vacancy: Assume the property will be empty 5-8% of the year.
Property Management: Usually 8-10% of rent if you hire a manager.
Use the calculator above to run different scenarios. Adjust the purchase price, rent, or interest rate to see how they impact your bottom line.