Rental Property ROI Calculator
Calculate Cap Rate, Cash-on-Cash Return, and Monthly Cash Flow for your real estate investments.
Understanding Your Rental Property ROI
Investing in real estate requires a deep dive into the numbers to ensure a property will generate a profit. This Rental Property ROI Calculator is designed to help investors determine the viability of a deal by looking at three core metrics: Cash Flow, Cap Rate, and Cash-on-Cash Return.
1. Net Operating Income (NOI)
NOI is the total income from the property minus all necessary operating expenses (excluding mortgage payments). Expenses include property taxes, insurance, and maintenance reserves. This figure tells you how much the property earns regardless of how it is financed.
2. Cap Rate (Capitalization Rate)
The Cap Rate is calculated by dividing the Annual NOI by the Purchase Price. It is a benchmark used to compare different real estate investments. For example, a $300,000 property with an annual NOI of $18,000 has a 6% Cap Rate.
Formula: Cap Rate = (Annual NOI / Purchase Price) * 100
3. Cash-on-Cash Return
This is arguably the most important metric for investors using leverage (mortgages). It measures the annual cash flow relative to the actual cash you invested (your down payment). If you put down $60,000 and your annual cash flow is $6,000, your Cash-on-Cash return is 10%.
Real-World Example Calculation
Suppose you buy a duplex for $400,000 with a 25% down payment ($100,000).
- Monthly Rent: $3,200
- Annual Taxes & Insurance: $6,000
- Maintenance (10%): $3,840/year
- Mortgage Payment: $1,900/month