Rental Property ROI Calculator

Cash-on-Cash ROI measures the annual return on your actual cash investment in a rental property. It's calculated by dividing the annual pre-tax cash flow by the total cash invested (down payment + closing costs), then multiplying by 100. This metric helps investors understand how efficiently their cash is working for them. For example, if you invest $100,000 and earn $8,000 annually, your Cash-on-Cash ROI is 8%.

A good Cash-on-Cash ROI for rental properties typically ranges from 8% to 12%, though this can vary by market and property type. Returns above 12% are considered excellent, while anything below 6% may need careful consideration. Remember that ROI is just one metric - also consider appreciation potential, tax benefits, and long-term wealth building. Location, property condition, and market trends all play crucial roles in determining what constitutes a good return.

Monthly mortgage payments are calculated using the amortization formula that accounts for principal and interest. Our calculator automatically computes this using the loan amount (purchase price minus down payment), annual interest rate, and loan term in years. The formula is: M = P[r(1+r)^n]/[(1+r)^n-1], where M is the monthly payment, P is the principal loan amount, r is the monthly interest rate, and n is the total number of payments. This ensures accurate payment estimates for your investment analysis.

Include all recurring monthly expenses: mortgage payment (principal and interest), property taxes, homeowners insurance, HOA fees (if applicable), property management fees (typically 8-10% of rent), repairs and maintenance (budget 1-2% of property value annually), utilities if landlord-paid, and vacancy reserves. Don't forget one-time costs like closing costs, which factor into your total investment. Accurate expense tracking is critical for realistic ROI calculations.

Property management fees typically range from 8-10% of monthly rent and directly reduce your net cash flow, thereby lowering your ROI. However, professional property management can actually improve ROI through better tenant screening, faster vacancy filling, proper maintenance, and legal compliance. While the fee reduces immediate returns, the time savings, stress reduction, and professional expertise often make it worthwhile. Our calculator defaults to 8%, reflecting Brookside Realty's competitive rate.

Use a rental property ROI calculator before making any investment decision, when comparing multiple properties, refinancing existing properties, adjusting rental rates, or evaluating property management options. It's also valuable for annual performance reviews of your portfolio and when presenting investment opportunities to partners or lenders. Regular calculations help you track performance, identify optimization opportunities, and make data-driven decisions. Always run multiple scenarios with different assumptions to understand potential outcomes.