Investing in real estate requires more than just looking at the monthly rent. To determine if a property is a "good deal," you must account for financing costs, operating expenses, and vacancy rates. This calculator provides three critical metrics for real estate investors:
Monthly Cash Flow: The actual profit left over after every single bill and the mortgage is paid.
Cap Rate (Capitalization Rate): The rate of return based on the property's income if you bought it in cash. It helps compare different properties regardless of how they are financed.
Cash on Cash Return: The annual cash flow divided by the actual cash you invested (down payment and closing costs). This is often the most important metric for leveraged investors.
Real-World Investment Example
Let's look at a typical single-family home purchase:
Scenario: You buy a duplex for $300,000 with 20% down ($60,000). The interest rate is 7% and total monthly rent is $2,800.
After paying the mortgage (~$1,596), taxes, insurance, and setting aside 10% for maintenance, your Monthly Cash Flow might be $540. Your Cash on Cash Return would be roughly 10.8%, which is generally considered a strong investment in today's market.
The 1% Rule vs. Reality
Many investors use the "1% Rule" as a quick screening tool—stating that a property should rent for 1% of its purchase price. However, in high-priced markets, this is rarely possible. This calculator allows you to dig deeper into the actual numbers, including property taxes which vary wildly by state, to see if the investment truly makes sense for your portfolio.
function calculateRentalROI() {
// Get Inputs
var price = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPercent = parseFloat(document.getElementById('downPaymentPercent').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var term = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var taxes = parseFloat(document.getElementById('annualTaxes').value) || 0;
var insurance = parseFloat(document.getElementById('annualInsurance').value) || 0;
var reservePercent = parseFloat(document.getElementById('maintVacancy').value) || 0;
// Calculations
var downPaymentAmount = price * (downPercent / 100);
var loanAmount = price – downPaymentAmount;
// Monthly Mortgage (P&I)
var monthlyRate = (interestRate / 100) / 12;
var totalMonths = term * 12;
var mortgage = 0;
if (monthlyRate > 0) {
mortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalMonths)) / (Math.pow(1 + monthlyRate, totalMonths) – 1);
} else {
mortgage = loanAmount / totalMonths;
}
// Monthly Expenses
var monthlyTaxes = taxes / 12;
var monthlyInsurance = insurance / 12;
var reserves = rent * (reservePercent / 100);
var totalExpenses = mortgage + monthlyTaxes + monthlyInsurance + reserves;
// ROI Metrics
var cashFlow = rent – totalExpenses;
// NOI (Net Operating Income) – Annualized income minus operating expenses (excluding mortgage)
var annualOperatingExpenses = taxes + insurance + (reserves * 12);
var annualGrossRent = rent * 12;
var annualNOI = annualGrossRent – annualOperatingExpenses;
var capRate = (annualNOI / price) * 100;
// Cash on Cash Return (Annual Cash Flow / Total Cash Invested)
// Note: For simplicity, we use down payment as initial cash invested.
var cocReturn = ((cashFlow * 12) / downPaymentAmount) * 100;
// Display Results
document.getElementById('roiResults').style.display = 'block';
document.getElementById('resCashFlow').innerText = '$' + cashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resCapRate').innerText = (isFinite(capRate) ? capRate.toFixed(2) : '0.00') + '%';
document.getElementById('resCoC').innerText = (isFinite(cocReturn) ? cocReturn.toFixed(2) : '0.00') + '%';
document.getElementById('resMortgage').innerText = '$' + mortgage.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Scroll to results
document.getElementById('roiResults').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}