Rental Property ROI Calculator
Calculate Cash Flow, Cap Rate, and Cash on Cash Return
Purchase Info
Loan Details
Income & Expenses
(Taxes, Insurance, HOA, Repairs)
Investment Analysis
Monthly Cash Flow
$0.00
Annual Cash Flow
$0.00
Net Operating Income (NOI)
$0.00
Cap Rate
0.00%
Cash on Cash Return (CoC)
0.00%
Understanding Your Rental Property ROI
Investing in real estate is a powerful way to build wealth, but simply buying a property doesn't guarantee a profit. To succeed, investors must analyze the numbers using metrics like Cash Flow, Cap Rate, and Cash on Cash Return. This calculator breaks down the financial performance of your rental property investment.
Key Metrics Defined
- Cash Flow: This is the net amount of cash moving into or out of your pocket after all operating expenses and mortgage payments are made. Positive cash flow ensures the property pays for itself and provides income.
- Net Operating Income (NOI): This calculates the profitability of the property before adding in the mortgage costs. It is calculated as (Rental Income – Operating Expenses). NOI is critical for determining the Cap Rate.
- Cap Rate (Capitalization Rate): A measure of the property's natural rate of return assuming a cash purchase. Calculated as (NOI / Purchase Price). It allows you to compare properties regardless of financing.
- Cash on Cash Return (CoC): The most important metric for leveraged investors. It measures the annual return on the actual cash you invested (Down Payment + Closing Costs). Calculated as (Annual Cash Flow / Total Cash Invested).
Real World Example
Imagine you purchase a property for $250,000. You put $50,000 down and pay $5,000 in closing costs for a total investment of $55,000.
If your monthly rent is $2,500 and your operating expenses (taxes, insurance, maintenance) are $800, your NOI is $1,700/month.
Assuming a mortgage payment of roughly $1,264 (at 6.5% interest), your monthly cash flow becomes $436 ($1,700 – $1,264). Your annual cash flow is $5,232.
Your Cash on Cash Return would be: ($5,232 / $55,000) = 9.51%. This indicates a solid performing asset.
How to Improve Your ROI
To increase your returns, you can focus on increasing rental income through renovations, reducing operating expenses (like appealing tax assessments or shopping for insurance), or refinancing to a lower interest rate to reduce monthly debt service.