Real Estate ROI Calculator
Analyze the potential return on investment for your real estate properties. Calculate cash-on-cash return, cap rate, and more.
Property Details
Financing
Rental Income
Annual Expenses
Investment Summary
Returns Analysis
How to Use This Calculator
1. Enter Property Details
Start by selecting your preferred currency and entering the basic details of your property:
- Purchase price of the property
- Closing costs and renovation expenses
- Down payment percentage
2. Specify Your Financing
Enter the financing details for your investment property:
- Interest rate on your mortgage
- Loan term in years
- The calculator will automatically compute your monthly mortgage payment
3. Add Income and Expenses
Input the property's income potential and ongoing expenses:
- Monthly rental income
- Expected vacancy rate
- Annual expenses (property tax, insurance, maintenance, property management, utilities, etc.)
4. Analyze Investment Returns
Review the calculated investment metrics:
- Cash-on-Cash Return: Annual cash flow relative to your initial investment
- Cap Rate: Property's performance without considering financing
- Annual cash flow: Monthly positive or negative cash flow
- Investment summary: Down payment, loan amount, and total investment
Compare Different Investment Scenarios
Try different combinations of purchase price, financing terms, rental income, and expenses to evaluate multiple investment opportunities or strategies. This allows you to make data-driven decisions and identify the most profitable real estate investments based on your financial goals and risk tolerance.
How Real Estate ROI Is Calculated
Understand the metrics used to evaluate real estate investment performance
Cash-on-Cash Return
Cash-on-Cash Return measures the annual cash flow of a property relative to the total cash invested.
CoC Return = (Annual Cash Flow ÷ Total Cash Invested) × 100%
Components:
- 1Annual Cash Flow: Net rental income minus all expenses and mortgage payments
- 2Total Cash Invested: Down payment + closing costs + renovation costs
This metric shows how efficiently your cash investment is generating income. For example, a CoC return of 8% means you're earning $8 annually for every $100 invested.
Capitalization Rate (Cap Rate)
Cap Rate measures the property's annual return irrespective of financing. It's useful for comparing properties regardless of how they're financed.
Cap Rate = (Net Operating Income ÷ Property Value) × 100%
Components:
- 1Net Operating Income (NOI): Annual rental income minus operating expenses (excluding mortgage)
- 2Property Value: The purchase price or current value of the property
A higher cap rate generally indicates a better return but may also reflect higher risk. Different markets have different average cap rates depending on location and property type.
Cash Flow Analysis
Cash flow represents the net income generated by your property after all expenses and debt service are paid.
Rental Income
- Vacancy Loss (% of Rental Income)
- Operating Expenses
= Net Operating Income (NOI)
- Mortgage Payments
= Cash Flow
Positive cash flow means your property is generating more income than it costs to own and maintain. This is essential for long-term investment sustainability and growth.
Pro tip: Even properties with low cash-on-cash returns might be good investments if they have strong potential for appreciation or if the mortgage will be paid off soon.
Additional Investment Considerations
When evaluating real estate investments, consider these additional factors:
- Appreciation: The increase in property value over time (not directly calculated in this tool)
- Tax Benefits: Deductions for mortgage interest, property taxes, and depreciation
- Equity Build-up: The portion of mortgage payments that goes toward principal
- Risk Assessment: Property condition, neighborhood trends, and market stability
This calculator provides estimates for educational purposes only. Real estate investments involve complex factors beyond numerical analysis. Always consult with real estate and financial professionals before making investment decisions.
Frequently Asked Questions
Everything you need to know about real estate investment analysis
What's the difference between Cap Rate and Cash-on-Cash Return?
Cap Rate measures a property's annual return regardless of how it's financed, using the Net Operating Income divided by the property value. Cash-on-Cash Return measures the annual cash flow relative to your actual cash invested, accounting for financing and only looking at the money you personally put in. Cap Rate evaluates the property itself, while Cash-on-Cash Return evaluates your specific investment.
What is considered a good Cash-on-Cash Return?
A good Cash-on-Cash Return typically falls between 8-12% for residential real estate investments, but this varies by market, property type, and risk level. Some investors aim for at least 8%, while others may accept lower returns in exchange for properties in prime locations with better appreciation potential, or demand higher returns in riskier areas.
How does the 1% rule relate to ROI?
The 1% rule suggests that a property's monthly rent should be at least 1% of its purchase price to potentially generate positive cash flow. While this is a quick screening method, it doesn't account for all expenses, vacancies, or market conditions. Our ROI calculator provides a more comprehensive analysis by including all income and expenses to calculate actual returns.
Does this calculator account for property appreciation?
No, this calculator focuses on measuring cash flow and returns based on rental income and expenses. Property appreciation, while potentially a significant factor in overall returns, is not included because it depends on market conditions and is more speculative in nature. You would need to make your own estimates of potential appreciation for your specific market.
Why do you separate property management as a percentage of rent?
Property management fees are typically charged as a percentage of collected rent (usually 8-12%), making them vary directly with rental income. Separating this expense allows for more accurate calculations and makes it easier for investors who self-manage properties to understand what their returns might look like if they were to hire a manager in the future.
How should I estimate maintenance costs?
A common approach is to budget 1-2% of the property value annually for maintenance, or use the "50% rule" which estimates that 50% of your rental income will go toward expenses (excluding mortgage payments). Newer properties typically require less maintenance, while older properties may require more. Past property records, if available, can also help estimate costs.
Should I include future renovations in the calculator?
The renovation costs field is primarily intended for initial renovations needed before renting the property. For future renovations, you should either increase your annual maintenance budget to save for them or do a separate ROI analysis for the specific renovation project when it's time to consider it.
How can I use this calculator for property comparison?
Enter the details for each property you're considering and compare their key metrics: Cap Rate, Cash-on-Cash Return, and Cash Flow. Save or screenshot the results to keep track of multiple properties. Remember to use consistent assumptions (like vacancy rate and maintenance costs) across properties for valid comparisons unless property-specific factors warrant different values.
Make data-driven investment decisions
Use our calculator to analyze potential properties and find the investments with the best returns.