Rental Property ROI Calculator
Rental property is America’s favorite investment. Calculate ROI with professional investment metrics.
How the Rental Property ROI Calculator works
Comprehensive rental analysis: cash flow, cap rate, cash-on-cash return, and total ROI. Evaluate properties like professional investors.
Rental property builds wealth when chosen wisely. This calculator provides the analysis needed for success.
How it works
Tutorial
Rental property investment requires analyzing multiple return metrics simultaneously because each reveals different performance aspects. Simple ROI shows basic returns, cap rate indicates market value relative to income, and cash-on-cash return reveals leverage benefits. Professional investors analyze all three metrics plus appreciation potential, tax benefits, and mortgage principal reduction to understand complete investment performance.
You have two options: use the calculator above for comprehensive rental property analysis with all metrics, or follow this guide to manually calculate multiple ROI measurements.
The Formula
| Metric | Formula |
|---|---|
| Cash-on-Cash Return | (Annual Cash Flow ÷ Cash Invested) × 100 |
| Cap Rate | (NOI ÷ Property Value) × 100 |
| Total ROI | (All Returns ÷ Investment) × 100 |
| GRM | Property Price ÷ Gross Annual Rent |
Step-by-Step Calculation
Let’s analyze a rental property using professional investor methods.
Step 1: Calculate Total Cash Investment
Determine all money invested upfront:
| Investment Item | Amount |
|---|---|
| Purchase Price | $275,000 |
| Down Payment (25%) | $68,750 |
| Closing Costs | $8,250 |
| Initial Repairs | $12,000 |
| Reserves (3 months PITI) | $4,500 |
| Total Cash Invested | $93,500 |
Calculation: $68,750 + $8,250 + $12,000 + $4,500 = $93,500
Step 2: Calculate Gross Rental Income
Determine total potential income:
| Income Source | Monthly | Annual |
|---|---|---|
| Base Rent | $2,200 | $26,400 |
| Pet Fees | $50 | $600 |
| Storage/Parking | $75 | $900 |
| Gross Rental Income | $2,325 | $27,900 |
Calculation: ($2,200 + $50 + $75) × 12 = $27,900
Step 3: Calculate Net Operating Income (NOI)
Subtract operating expenses but not debt service:
| Expense Category | Annual Amount |
|---|---|
| Gross Rental Income | $27,900 |
| Vacancy Loss (5%) | -$1,395 |
| Property Tax | -$3,850 |
| Insurance | -$1,450 |
| Maintenance (8%) | -$2,232 |
| Property Management (10%) | -$2,790 |
| HOA Fees | -$1,200 |
| Utilities (if owner-paid) | -$0 |
| Net Operating Income | $14,983 |
Calculation: $27,900 – $1,395 – $3,850 – $1,450 – $2,232 – $2,790 – $1,200 = $14,983
Step 4: Calculate Cap Rate
Determine property performance independent of financing:
| Component | Value |
|---|---|
| Net Operating Income | $14,983 |
| Property Purchase Price | $275,000 |
| Divide NOI by price | $14,983 ÷ $275,000 |
| Capitalization Rate | 5.45% |
Calculation: ($14,983 ÷ $275,000) × 100 = 5.45%
Step 5: Calculate Annual Cash Flow
Subtract mortgage payments from NOI:
| Component | Amount |
|---|---|
| Net Operating Income | $14,983 |
| Annual Mortgage Payment | -$11,880 |
| Annual Cash Flow | $3,103 |
Calculation: $14,983 – $11,880 = $3,103
Step 6: Calculate Cash-on-Cash Return
Determine return on actual dollars invested:
| Step | Calculation | Result |
|---|---|---|
| Divide cash flow by investment | $3,103 ÷ $93,500 | 0.0332 |
| Convert to percentage | 0.0332 × 100 | 3.32% |
Calculation: ($3,103 ÷ $93,500) × 100 = 3.32%
Step 7: Add Wealth-Building Components
Include appreciation and principal reduction:
| Return Component | Annual Amount |
|---|---|
| Cash Flow | $3,103 |
| Principal Paydown (Year 1) | $3,420 |
| Appreciation (3%) | $8,250 |
| Tax Benefits (estimated) | $2,800 |
| Total Annual Return | $17,573 |
Calculation: $3,103 + $3,420 + $8,250 + $2,800 = $17,573
Step 8: Calculate Total ROI
Measure comprehensive return on investment:
| Step | Calculation | Result |
|---|---|---|
| Divide total return by investment | $17,573 ÷ $93,500 | 0.188 |
| Convert to percentage | 0.188 × 100 | 18.8% |
Calculation: ($17,573 ÷ $93,500) × 100 = 18.8%
Step 9: Calculate Additional Metrics
Determine Gross Rent Multiplier for comparison:
| Metric | Calculation | Result |
|---|---|---|
| Gross Rent Multiplier | $275,000 ÷ $27,900 | 9.86 |
| 1% Rule Test | $27,900 ÷ 12 ÷ $275,000 | 0.84% |
Reasoning: GRM of 9.86 is reasonable; property falls short of the 1% rule (rent = 1% of purchase price).
Final Answer: Cash-on-cash return is 3.32%, cap rate is 5.45%, but total ROI including all benefits is 18.8%
What This Means
While 3.32% cash flow return appears modest, the complete 18.8% total return reveals rental real estate’s true wealth-building power. The combination of cash flow, forced savings through principal reduction, appreciation, and tax advantages creates returns that significantly exceed what simple cash flow analysis suggests. This is why sophisticated investors focus on total return, not just monthly cash flow.
Meet the fastest voice-to-text for professionals
WriteVoice turns your voice into clean, punctuated text that works in any app. Create and ship faster without typing. Your first step was Rental Property ROI Calculator; your next step is instant dictation with WriteVoice.
A blazing-fast voice dictation
Press a hotkey and talk. WriteVoice inserts accurate, formatted text into any app, no context switching
Works in any app
Press one hotkey and speak; your words appear as clean, punctuated text in Slack, Gmail, Docs, Jira, Notion, and VS Code—no context switching, just speed with writevoice
Accurate, multilingual, and smart
97%+ recognition, smart punctuation, and 99+ languages so your ideas land first try, built for teams and pros.
Private by default
Zero retention, audio and text are discarded instantly, with on-device controls so you can dictate sensitive work confidently.