Rental Property ROI Calculator

How to calculate rental property ROI

Rental property ROI is the profit a property earns in a year divided by the money you put into it. The tricky part is that "profit" and "money in" can be defined several ways, so a good rental property ROI calculator shows more than one number. This one gives you monthly cash flow, cash-on-cash return, cap rate, a first-year total ROI that includes loan principal paydown and optional appreciation, and a 1% rule check, all updating as you type.

The basic steps are the same whichever return you want:

1. Start with rent. Annual rent is monthly rent × 12. Subtract a vacancy allowance, because no unit is occupied 100% of the time.
2. Subtract operating costs. Property tax, insurance, management, maintenance, capital expenditure reserves (roofs, HVAC, appliances), HOA dues and utilities you pay. What's left is net operating income (NOI).
3. Subtract the mortgage. NOI minus the annual loan payments (principal and interest) is your annual cash flow.
4. Divide by the right base. NOI ÷ price is the cap rate. Annual cash flow ÷ cash invested is cash-on-cash return. Add principal paydown and appreciation to the numerator for total ROI.

Worked example using the calculator defaults

The calculator loads with these inputs: a $200,000 property, $40,000 down (20%), $4,000 closing costs, no rehab, a 6.5% 30-year fixed loan, $1,800 monthly rent, 5% vacancy, $2,400 a year property tax, $1,200 a year insurance, 8% management, 5% maintenance, 5% capex reserve, and 3% annual appreciation. Here is the math, rounded to the nearest dollar:

• Loan: $200,000 − $40,000 = $160,000. Principal and interest at 6.5% over 30 years is $1,011/month, or $12,136 a year.
• Rent collected: $21,600 a year less 5% vacancy ($1,080) = $20,520.
• Operating costs: tax $2,400 + insurance $1,200 + management $1,642 + maintenance $1,026 + capex $1,026 = $7,294 (management, maintenance and capex are percentages of rent collected).
• Net operating income: $20,520 − $7,294 = $13,226.
• Cap rate: $13,226 ÷ $200,000 = 6.61%.
• Annual cash flow: $13,226 − $12,136 = $1,091, about $91 a month.
• Cash invested: $40,000 + $4,000 = $44,000.
• Cash-on-cash return: $1,091 ÷ $44,000 = 2.48%.
• Principal paydown in year 1: the loan balance falls by about $1,788. Appreciation at 3% on $200,000 adds $6,000.
• Total ROI (year 1): ($1,091 + $1,788 + $6,000) ÷ $44,000 = 20.18%. Without the appreciation assumption it is 6.54%.
• 1% rule: $1,800 ÷ $200,000 = 0.90%, just under the 1% screen.

Notice how different the numbers look. The property's own yield is 6.61%, but after financing the cash-on-cash return is only 2.48%, and most of the first-year total return comes from principal paydown and an appreciation assumption rather than from monthly cash flow. That is exactly why one number is never enough.

Rental ROI calculator: ROI vs cash-on-cash vs cap rate

Cap rate ignores how you pay for the property, so a cash buyer and a heavily leveraged buyer see the same cap rate on the same building. Cash-on-cash return and total ROI depend entirely on your financing and the cash you put in. For deeper dives see the dedicated cash-on-cash return calculator and cap rate calculator.

What is a good ROI on a rental property?

There is no single "good" number, because it depends on your market, the property's condition, how much work you do yourself, your loan, and how much risk you are willing to carry. As very general reference points that investors often mention (not targets or advice): cash-on-cash returns somewhere in the high single digits to low double digits are commonly cited as healthy, cap rates of roughly 4–6% are common in expensive, lower-risk markets while 7–10% or more are seen in cheaper markets that may carry more vacancy or maintenance risk, and many investors use the 1% rule as a rough rent-to-price screen. Compare the result with the other places your money could go, such as an index fund or paying down debt, and keep in mind that the more optimistic your rent, vacancy and appreciation inputs, the less reliable the answer.

ROI calculator for rental property: what to enter

• Purchase price, down payment and closing costs: closing costs and any cash-funded rehab count as cash invested, so they lower your return percentages.
• Rehab: money you spend up front to make the property rentable. It is added to cash invested and to the all-in price used for the 1% rule.
• Vacancy: 5–8% is a common starting assumption; use local data if you have it.
• Property tax and insurance: enter annual amounts. Check the actual tax bill, because reassessment after a sale can raise it.
• Management, maintenance and capex: entered as a percentage of rent collected. Self-managing does not make your time free; many investors still reserve something for it.
• Other monthly costs: HOA dues, landlord-paid utilities, lawn care, and similar.
• Appreciation: optional and speculative. Set it to 0% to see returns without relying on price growth.

Rental profitability calculator: what this does not include

This is a first-pass screen, not a full underwriting model. It does not model income tax, depreciation, selling costs, rent growth, loan refinancing, or changes in expenses over time, and it uses one fixed-rate loan with the payment calculated as principal and interest only (property tax and insurance are entered separately above). For anything you are about to put money into, check the numbers with a qualified accountant, lender or real estate professional. Once you own the property, replace the projections with real figures using a rental income and expense spreadsheet.