Rental Property ROI Calculator: Analyze Your Real Estate Investment
Successful real estate investing relies on accurate data. Whether you are buying your first single-family rental or analyzing a multi-unit property, understanding your Return on Investment (ROI) is crucial. Our Rental Property ROI Calculator helps investors determine the profitability of a potential purchase by analyzing Cash on Cash (CoC) returns, Cap Rates, and monthly cash flow.
How to Calculate Rental Property ROI
Calculating the ROI on a rental property involves more than just subtracting the mortgage from the rent. To get a true picture of your investment's performance, you must account for all initial costs and ongoing operating expenses.
Key Metrics Explained
Cash on Cash Return (CoC): This is arguably the most important metric for rental investors. It measures the annual cash income earned on the property against the actual cash invested (Down Payment + Closing Costs + Repairs). A CoC return of 8-12% is often considered a solid target for long-term rentals.
Cap Rate (Capitalization Rate): This measures the property's natural rate of return assuming you bought it in cash. It is calculated by dividing the Net Operating Income (NOI) by the current market value (or purchase price) of the asset. It helps compare properties regardless of financing methods.
Net Operating Income (NOI): This is your total annual revenue (rent) minus all necessary operating expenses (taxes, insurance, maintenance, management), excluding mortgage payments.
Cash Flow: The net amount of cash moving in or out of the business after all expenses and debt service (mortgage) are paid. Positive cash flow ensures the property pays for itself.
Understanding the Input Fields
To get the most accurate results from this calculator, ensure you have the following data:
Purchase Price: The agreed-upon price to buy the property.
Down Payment & Closing Costs: The cash you must pay upfront. This constitutes your "Initial Investment."
Rehab Costs: Any immediate repairs needed to make the property rent-ready. This is added to your initial cash investment.
Monthly Operating Expenses: Be realistic. Include Property Taxes, Landlord Insurance, HOA fees, Vacancy reserves (usually 5-10%), and Maintenance reserves (5-10%).
Example Calculation
Imagine you buy a property for $250,000. You put $50,000 down and pay $5,000 in closing costs. You rent it out for $2,200/month.
If your monthly operating expenses are $600 and your mortgage principal and interest payment is roughly $1,264 (at 6.5% interest), your monthly cash flow is roughly $336. Over a year, that is $4,032 in profit. Dividing $4,032 by your total cash investment of $55,000 yields a 7.3% Cash on Cash return.
function calculateROI() {
// Get Input Values
var price = parseFloat(document.getElementById('purchasePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
var rehabCosts = parseFloat(document.getElementById('rehabCosts').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var termYears = parseFloat(document.getElementById('loanTerm').value);
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var monthlyExpenses = parseFloat(document.getElementById('monthlyExpenses').value);
// Validation
if (isNaN(price) || isNaN(downPayment) || isNaN(monthlyRent)) {
alert("Please enter valid numbers for Price, Down Payment, and Rent.");
return;
}
// 1. Calculate Loan Amount
var loanAmount = price – downPayment;
// 2. Calculate Monthly Mortgage Payment (Principal & Interest)
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = termYears * 12;
var mortgagePayment = 0;
if (interestRate > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
mortgagePayment = loanAmount / numberOfPayments;
}
// 3. Calculate Monthly Cash Flow
// Cash Flow = Rent – (Operating Expenses + Mortgage Payment)
var totalMonthlyCosts = monthlyExpenses + mortgagePayment;
var monthlyCashFlow = monthlyRent – totalMonthlyCosts;
var annualCashFlow = monthlyCashFlow * 12;
// 4. Calculate Net Operating Income (NOI)
// NOI = (Rent – Operating Expenses) * 12 0) {
cocReturn = (annualCashFlow / totalInvestment) * 100;
}
// 7. Calculate Cap Rate
// Cap Rate = (Annual NOI / Purchase Price) * 100
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// Display Results
document.getElementById('cocResult').innerHTML = cocReturn.toFixed(2) + "%";
document.getElementById('capRateResult').innerHTML = capRate.toFixed(2) + "%";
var cashFlowElement = document.getElementById('cashFlowResult');
cashFlowElement.innerHTML = "$" + monthlyCashFlow.toFixed(2);
if(monthlyCashFlow < 0) {
cashFlowElement.style.color = "#e53e3e";
} else {
cashFlowElement.style.color = "#2c7a7b";
}
document.getElementById('mortgageResult').innerHTML = "$" + mortgagePayment.toFixed(2);
document.getElementById('investmentResult').innerHTML = "$" + totalInvestment.toLocaleString();
// Show Results Div
document.getElementById('roiResults').style.display = "block";
}