Property ROI Calculator
Evaluating the return on investment for a rental property requires looking beyond just rental income. This calculator analyzes key metrics that real estate investors use: cap rate, cash-on-cash return, net operating income, and total ROI including appreciation. These metrics help you compare investment properties and make informed purchasing decisions.
Calculate Rental Property ROI
This calculator provides estimates for educational purposes. Actual returns depend on tenant quality, local market conditions, unexpected repairs, interest rate changes, tax implications, and many other factors. Vacancy, maintenance, and appreciation assumptions have a major impact on projected returns. Past performance does not predict future results. This is not financial or investment advice. Consult with a real estate professional and financial advisor before making investment decisions.
Key Investment Metrics Explained
| Metric | Formula | What It Tells You |
|---|---|---|
| Cap Rate | NOI ÷ Purchase Price | Property's return independent of financing; useful for comparing properties |
| Cash-on-Cash Return | Annual Cash Flow ÷ Total Cash Invested | Return on your actual out-of-pocket investment |
| NOI | Gross Income − Operating Expenses | Property's income before debt service; does not include mortgage payments |
| Cash Flow | NOI − Debt Service | Actual money in your pocket each month after all expenses and mortgage |
| Total ROI | (Cash Flow + Equity + Appreciation) ÷ Cash Invested | Complete return including all sources of wealth building |
Frequently Asked Questions
What is a good cap rate?
Cap rates vary by market and property type. In high-demand urban areas, 4–6% is typical. In secondary markets, 6–10% is common. Higher cap rates indicate higher risk or lower demand. A cap rate below 4% rarely makes sense for individual investors. Compare cap rates within the same market and property type rather than across different markets.
What is the 1% rule?
The 1% rule is a quick screening tool: monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. This does not guarantee profitability but helps quickly filter properties that are unlikely to produce positive cash flow. Many markets no longer meet this rule, especially in high-appreciation areas.
How much should I budget for maintenance?
A common guideline is 8–12% of gross rental income, or 1–1.5% of the property value annually. Older properties, properties with deferred maintenance, and those with pools or complex systems should budget higher (12–15%). New construction may need less initially but will still require reserves for eventual capital expenditures like roof replacement, HVAC, and appliances.
Should I self-manage or hire a property manager?
Property management typically costs 8–12% of gross rent plus leasing fees (50–100% of one month's rent for new tenants). Self-management saves this cost but requires significant time and availability. For out-of-state investors or those with multiple properties, professional management is usually worthwhile despite the expense.