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Rental ROI / Cash-on-Cash Return Calculator

Analyze rental property returns including cash flow, cash-on-cash return, cap rate, appreciation, and equity buildup. Enter purchase details, rent, and expenses to evaluate an investment.

Property & Investment Details

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Typically 20-25% of purchase price
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Typically 2-5% of purchase price

Loan Details

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Principal & Interest only

Monthly Income & Expenses

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Recommended: 1% of property value per year
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Property management, utilities, etc.

Analysis Parameters

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Historical average is around 3-4% per year
How many years to project returns

Understanding Rental Property ROI Metrics

Cash-on-Cash Return

Cash-on-cash return measures the annual pre-tax cash flow relative to the total cash invested (down payment + closing costs). This is the most direct measure of how much cash you're getting back on your cash investment each year.

Formula: Annual Cash Flow / Total Cash Invested × 100

Good range: Most investors target 8-12% or higher. Anything above 10% is generally considered excellent.

Total ROI & Annualized ROI

Total ROI measures your complete return including cash flow, appreciation, and equity buildup over the analysis period. Annualized ROI (CAGR) converts this to an average annual return, making it easier to compare with other investments.

What's included:

  • Cash Flow: Net rental income after all expenses
  • Appreciation: Increase in property value over time
  • Equity Buildup: Mortgage principal paid down (building equity)

Cap Rate (Capitalization Rate)

Cap rate measures the property's return potential based on Net Operating Income (NOI), independent of financing. It's calculated by dividing NOI by the purchase price.

Formula: Net Operating Income / Purchase Price × 100

Note: NOI excludes mortgage payments but includes all operating expenses (taxes, insurance, maintenance, etc.). Cap rate helps you compare properties objectively regardless of how they're financed.

Good range: Varies by market, but generally 4-10%. Higher cap rates indicate better returns but may come with higher risk.

Equity Buildup

Every mortgage payment includes both interest and principal. The principal portion builds your equity in the property. This calculator tracks how much principal you'll pay down over the analysis period, which is part of your total return.

Combined with appreciation, equity buildup creates long-term wealth even if the property has minimal cash flow.

Important Considerations

  • Vacancy: This calculator assumes full occupancy. Consider reducing rental income by 5-10% for vacancy.
  • Property Management: If using a property manager, factor in their fee (typically 8-10% of rent).
  • Maintenance: The 1% rule (1% of property value per year) is a common estimate for maintenance reserves.
  • Appreciation: Historical averages are around 3-4% annually, but this varies greatly by market and property type.
  • Taxes: This calculator shows pre-tax returns. Consult a tax professional to understand your after-tax returns.
  • Market Conditions: Past performance doesn't guarantee future results. Always research local market trends.

What Makes a Good Investment?

While specific criteria vary by market and investor goals, here are some general benchmarks:

  • Cash-on-Cash Return: Target 8-12%+ (excellent is 10%+)
  • Cap Rate: Competitive with similar properties in the market (generally 4-10%)
  • Total ROI: Should significantly beat stock market returns (10-15%+ annualized)
  • Cash Flow: Positive monthly cash flow is ideal, but some investors accept break-even with appreciation potential
Disclaimer: This calculator provides estimates for analysis purposes only and should not be considered financial, investment, or tax advice. Actual returns may vary significantly based on market conditions, property performance, and unforeseen expenses. Always conduct thorough due diligence and consult with qualified professionals before making investment decisions.