Property ROI Calculator
Property ROI drives wealth building. Calculate comprehensive returns for real estate investments.
How the Property ROI Calculator works
Analyze any property type with appropriate metrics. Calculate cash flow, appreciation, and total returns for investment decisions.
Property investment requires careful analysis. This calculator provides complete ROI evaluation for confident investing.
How it works
Tutorial
Property investment ROI calculation must account for multiple return streams: rental income, appreciation, mortgage principal reduction, and tax benefits. Different property types—residential rentals, commercial properties, fix-and-flip projects—require different calculation approaches. Understanding how to calculate comprehensive property ROI enables accurate comparison between investment opportunities and asset classes.
You have two options: use the calculator above for property-specific ROI analysis, or follow this guide to manually calculate returns for any property type.
The Formula
| Return Component | Formula |
|---|---|
| Cash Flow | NOI – Debt Service |
| Appreciation | Property Value × Annual Appreciation Rate |
| Principal Paydown | Annual Principal Portion of Mortgage |
| Total ROI | (All Returns ÷ Cash Invested) × 100 |
Step-by-Step Calculation
Let’s calculate comprehensive ROI for a duplex investment property.
Step 1: Calculate Total Investment
Determine all cash invested:
| Investment Item | Amount |
|---|---|
| Purchase Price | $385,000 |
| Down Payment (25%) | $96,250 |
| Closing Costs | $11,550 |
| Initial Repairs/Renovations | $18,000 |
| Reserves (6 months) | $7,200 |
| Total Cash Invested | $133,000 |
Calculation: $96,250 + $11,550 + $18,000 + $7,200 = $133,000
Step 2: Calculate Annual Rental Income
Determine gross rental revenue:
| Unit | Monthly Rent | Annual Rent |
|---|---|---|
| Unit A (2BR/2BA) | $1,650 | $19,800 |
| Unit B (2BR/1BA) | $1,450 | $17,400 |
| Total Gross Rental Income | $3,100 | $37,200 |
Calculation: ($1,650 + $1,450) × 12 = $37,200
Step 3: Calculate Net Operating Income
Subtract all operating expenses:
| Expense | Annual Amount |
|---|---|
| Gross Rental Income | $37,200 |
| Vacancy (5%) | -$1,860 |
| Property Tax | -$5,390 |
| Insurance | -$1,850 |
| Maintenance (7%) | -$2,604 |
| Property Management (9%) | -$3,348 |
| Utilities (landlord-paid) | -$1,200 |
| HOA/Other | -$0 |
| Net Operating Income | $20,948 |
Calculation: $37,200 – $1,860 – $5,390 – $1,850 – $2,604 – $3,348 – $1,200 = $20,948
Step 4: Calculate Annual Cash Flow
Subtract mortgage payments from NOI:
| Component | Amount |
|---|---|
| Net Operating Income | $20,948 |
| Annual Mortgage Payment (P&I) | -$18,540 |
| Annual Cash Flow | $2,408 |
| Monthly Cash Flow | $201 |
Calculation: $20,948 – $18,540 = $2,408 annually or $201/month
Step 5: Calculate Cash-on-Cash Return
Measure return on actual invested dollars:
| Step | Calculation | Result |
|---|---|---|
| Divide cash flow by investment | $2,408 ÷ $133,000 | 0.0181 |
| Convert to percentage | 0.0181 × 100 | 1.81% |
Calculation: ($2,408 ÷ $133,000) × 100 = 1.81%
Step 6: Calculate Appreciation Benefit
Add property value growth:
| Component | Value |
|---|---|
| Property Value | $385,000 |
| Annual Appreciation Rate | × 3.5% |
| Annual Appreciation | $13,475 |
Calculation: $385,000 × 0.035 = $13,475
Step 7: Calculate Mortgage Principal Reduction
Determine equity buildup through debt paydown:
| Component | Amount |
|---|---|
| Total Annual Payment | $18,540 |
| Interest Portion (Year 1) | -$14,400 |
| Principal Reduction | $4,140 |
Calculation: $18,540 – $14,400 = $4,140
Step 8: Calculate Tax Benefits
Estimate tax deduction value:
| Deduction | Amount |
|---|---|
| Mortgage Interest | $14,400 |
| Property Tax | $5,390 |
| Depreciation (27.5 year) | $14,000 |
| Operating Expenses | $10,862 |
| Total Deductions | $44,652 |
| Tax Savings @ 24% bracket | $10,716 |
| Net Tax Benefit (conservative) | $4,000 |
Reasoning: Conservative estimate accounts for complexity; actual benefit varies by tax situation.
Step 9: Calculate Total Annual Return
Sum all return components:
| Return Component | Annual Amount |
|---|---|
| Cash Flow | $2,408 |
| Appreciation | $13,475 |
| Principal Reduction | $4,140 |
| Tax Benefits | $4,000 |
| Total Annual Return | $24,023 |
Calculation: $2,408 + $13,475 + $4,140 + $4,000 = $24,023
Step 10: Calculate Total ROI
Measure comprehensive return on investment:
| Step | Calculation | Result |
|---|---|---|
| Divide total return by investment | $24,023 ÷ $133,000 | 0.1806 |
| Convert to percentage | 0.1806 × 100 | 18.06% |
Calculation: ($24,023 ÷ $133,000) × 100 = 18.06%
Step 11: Calculate Additional Metrics
Provide comprehensive analysis:
| Metric | Calculation | Value |
|---|---|---|
| Cap Rate | ($20,948 ÷ $385,000) × 100 | 5.44% |
| Gross Rent Multiplier | $385,000 ÷ $37,200 | 10.35 |
| Debt Service Coverage | $20,948 ÷ $18,540 | 1.13 |
Final Answer: Cash flow ROI is 1.81%, but total ROI including appreciation, principal, and taxes is 18.06%
What This Means
An 18.06% total return significantly exceeds the modest 1.81% cash flow return, illustrating why experienced real estate investors focus on total returns rather than monthly cash flow alone. The property generates $201/month in cash flow (nice but modest), but the combination of $1,123/month in appreciation, $345/month in forced equity through principal paydown, and $333/month in tax benefits creates real wealth. This duplex turns $133K invested into $24K annual returns—a strong investment that compounds over time as rents increase and the mortgage balance decreases.
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