Rental Property ROI Calculator

How it is calculated

The tool calculates a simple cash-on-cash return in two steps. First annual cash flow = annual rent − annual expenses. Then ROI (%) = annual cash flow ÷ total cash invested × 100. Rent is the income for a whole year, and expenses are everything you pay out in a year to keep the property running, including loan payments if you borrowed. Total cash invested is only the money you put in yourself, such as the down payment, closing costs and upfront repairs. Rent and expenses cannot be negative and the investment must be above zero. If expenses are higher than rent, the cash flow and ROI are negative. The result is a one-year figure: it does not include property appreciation, taxes on the income or any change in the loan balance. The dollar sign is only a symbol for your own currency.

Common mistakes

• Putting the full purchase price in the investment field when you borrowed. This tool measures return on your own cash, so enter the down payment, closing costs and repairs; the loan payments belong under expenses instead.
• Entering monthly rent and monthly expenses. Both fields are annual, so a monthly rent of 1,500 must be typed as 18,000.
• Leaving out costs that reduce the cash flow, such as vacancy, property tax, insurance, management fees and repairs. Without them the ROI looks better than it is.
• Counting the loan principal repayments as a profit, or leaving them out of expenses. Whatever you actually pay each year on the loan should be in the expenses field.
• Reading a negative ROI as an error. If annual expenses exceed rent, the result is a negative cash flow and a negative percentage, which is a real loss.