ROI Calculator for Rental Property
Rental property ROI determines investment success. Calculate returns with multiple evaluation metrics.
How the ROI Calculator for Rental Property works
Analyze rentals comprehensively: cash flow, cap rate, total return. Make informed investment decisions with professional metrics.
Successful rental investment requires accurate ROI. This calculator provides the analysis for confident decisions.
How it works
Tutorial
Rental property ROI calculation requires analyzing multiple return metrics because a single number doesn’t tell the complete story. Cash flow shows monthly income, cap rate indicates market value, cash-on-cash return reveals leverage benefits, and total ROI includes appreciation and tax advantages. Understanding how to calculate and interpret each metric helps investors make informed decisions and compare properties accurately.
You have two options: use the calculator above for comprehensive rental property ROI analysis, or follow this guide to manually calculate returns using professional methods.
The Formula
| Metric | Formula |
|---|---|
| NOI | Gross Rent – Operating Expenses |
| Cap Rate | (NOI ÷ Property Price) × 100 |
| Cash Flow | NOI – Debt Service |
| Cash-on-Cash | (Cash Flow ÷ Cash Invested) × 100 |
| Total ROI | (All Returns ÷ Investment) × 100 |
Step-by-Step Calculation
Let’s calculate comprehensive rental property ROI with all key metrics.
Step 1: Calculate Total Investment
Determine all cash invested in the property:
| Investment Item | Amount |
|---|---|
| Purchase Price | $320,000 |
| Down Payment (20%) | $64,000 |
| Closing Costs (2.5%) | $8,000 |
| Initial Repairs/Updates | $15,000 |
| Furnishings (if applicable) | $0 |
| Total Cash Invested | $87,000 |
Calculation: $64,000 + $8,000 + $15,000 = $87,000
Step 2: Calculate Annual Gross Income
Determine total potential rental income:
| Income Source | Monthly | Annual |
|---|---|---|
| Base Rent | $2,500 | $30,000 |
| Additional Income | $100 | $1,200 |
| Gross Annual Income | $2,600 | $31,200 |
Calculation: ($2,500 + $100) × 12 = $31,200
Step 3: Calculate Operating Expenses
List all property expenses except mortgage:
| Expense Category | Annual Amount |
|---|---|
| Property Tax | $4,480 |
| Insurance | $1,600 |
| Property Management (10%) | $3,120 |
| Maintenance Reserve (8%) | $2,496 |
| Vacancy Reserve (5%) | $1,560 |
| HOA Fees | $0 |
| Utilities (if owner-paid) | $0 |
| Total Operating Expenses | $13,256 |
Calculation: $4,480 + $1,600 + $3,120 + $2,496 + $1,560 = $13,256
Step 4: Calculate Net Operating Income (NOI)
Subtract expenses from income:
| Component | Amount |
|---|---|
| Gross Annual Income | $31,200 |
| Total Operating Expenses | -$13,256 |
| Net Operating Income | $17,944 |
Calculation: $31,200 – $13,256 = $17,944
Step 5: Calculate Capitalization Rate
Measure property performance independent of financing:
| Step | Calculation | Result |
|---|---|---|
| Divide NOI by purchase price | $17,944 ÷ $320,000 | 0.0561 |
| Convert to percentage | 0.0561 × 100 | 5.61% |
Calculation: ($17,944 ÷ $320,000) × 100 = 5.61%
Step 6: Calculate Annual Cash Flow
Subtract mortgage payments from NOI:
| Component | Amount |
|---|---|
| Net Operating Income | $17,944 |
| Annual Mortgage Payment | -$16,320 |
| Annual Cash Flow | $1,624 |
| Monthly Cash Flow | $135 |
Calculation: $17,944 – $16,320 = $1,624 annual or $135/month
Step 7: Calculate Cash-on-Cash Return
Measure return on actual invested dollars:
| Step | Calculation | Result |
|---|---|---|
| Divide cash flow by investment | $1,624 ÷ $87,000 | 0.0187 |
| Convert to percentage | 0.0187 × 100 | 1.87% |
Calculation: ($1,624 ÷ $87,000) × 100 = 1.87%
Step 8: Calculate Total Return (All Benefits)
Include all wealth-building components:
| Return Component | Annual Amount |
|---|---|
| Cash Flow | $1,624 |
| Mortgage Principal Paydown | $4,100 |
| Appreciation (3% assumed) | $9,600 |
| Tax Benefits (estimated) | $3,200 |
| Total Annual Return | $18,524 |
Calculation: $1,624 + $4,100 + $9,600 + $3,200 = $18,524
Step 9: Calculate Total ROI Percentage
Measure comprehensive return on investment:
| Step | Calculation | Result |
|---|---|---|
| Divide total return by investment | $18,524 ÷ $87,000 | 0.2129 |
| Convert to percentage | 0.2129 × 100 | 21.29% |
Calculation: ($18,524 ÷ $87,000) × 100 = 21.29%
Final Answer: Cash flow is $135/month, cash-on-cash return is 1.87%, cap rate is 5.61%, but total ROI including all benefits is 21.29%
What This Means
While the 1.87% cash-on-cash return and $135 monthly cash flow seem modest, the total 21.29% return reveals rental real estate’s true wealth-building power. The combination of modest cash flow, forced savings through principal reduction, appreciation, and tax advantages creates returns significantly exceeding what the monthly rent check suggests. This is why experienced investors focus on total return rather than cash flow alone.
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 ROI Calculator for Rental Property; 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.