Rental Property ROI Calculator
Calculate rental property ROI, cap rate, and cash-on-cash return.
Enter purchase price, monthly rent, expenses, and mortgage to compare investment returns.
Rental Property ROI measures the profitability of a real estate investment by comparing annual income against total investment costs.
Cash-on-Cash Return:
Cash-on-Cash ROI = (Annual Cash Flow / Total Cash Invested) × 100
This is the most common ROI metric for rental properties because it measures return on the actual cash you put in, not the full property value.
Annual Cash Flow:
Cash Flow = Gross Rental Income - Total Expenses - Mortgage Payments
Total Cash Invested includes:
- Down payment
- Closing costs (typically 2-5% of purchase price)
- Initial repair/renovation costs
Annual expenses typically include:
- Property taxes (varies by location, usually 0.5-2.5% of property value)
- Insurance ($800-$2,000+ per year)
- Maintenance and repairs (budget 1-2% of property value per year)
- Property management fees (8-12% of monthly rent if using a manager)
- Vacancy allowance (5-10% of annual rent to account for empty months)
- HOA fees (if applicable)
- Utilities paid by landlord (if any)
Total ROI (including appreciation):
Total ROI = (Annual Cash Flow + Annual Appreciation) / Total Cash Invested × 100
Average annual property appreciation in the US is about 3-5%, but this varies significantly by market.
The 1% Rule (quick screening): A property is worth investigating if the monthly rent is at least 1% of the purchase price. Example: $200,000 property should rent for at least $2,000/month.
Cap Rate:
Cap Rate = Net Operating Income / Purchase Price × 100
A good cap rate is generally considered 5-10%.
Below 5% may indicate the property is overpriced relative to its rental income.