Rental Property ROI Calculator
Calculate cash-on-cash return, total ROI with appreciation and equity paydown, or compare leveraged vs all-cash purchases. Works with any currency.
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How to Use This Calculator
Tab "Cash-on-Cash ROI"
Enter your purchase price, down payment percentage, monthly rent, and all operating expenses (vacancy, management, maintenance, insurance, property taxes). Add your mortgage rate and term. The calculator shows your Net Operating Income (NOI), annual cash flow after mortgage, and cash-on-cash ROI — the percentage return on the actual cash you invested.
Tab "Total ROI (with Appreciation)"
Same inputs as Tab 1, plus an annual appreciation rate. The result shows your total return over 1, 5, and 10 years, broken down into three components: cash flow, equity paydown (principal paid on the mortgage), and property appreciation. This gives the full picture — cash-on-cash ROI alone misses two of the three ways rental properties build wealth.
Tab "Leveraged vs Cash"
Compares buying with a mortgage (leveraged) versus buying all-cash (no mortgage). See which strategy produces higher ROI, how leverage amplifies appreciation, and why a 4% property appreciation can become a 20% return on your invested cash.
The Formulas
NOI = Effective Gross Income − Operating Expenses
Effective Gross Income = Annual Rent × (1 − Vacancy Rate)
Operating Expenses = Management + Maintenance + Insurance + Property Taxes
NOI does NOT include mortgage payments.
Cash Flow:
Annual Cash Flow = NOI − Annual Mortgage Payment (P&I)
Cash-on-Cash ROI:
Cash-on-Cash ROI = Annual Cash Flow / Total Cash Invested × 100%
Total Cash Invested = Down Payment + Closing Costs + Initial Repairs
Cap Rate (for comparison):
Cap Rate = NOI / Purchase Price × 100%
Cap rate ignores financing. Use it to compare properties, not to measure your actual return.
Total ROI (over N years):
Total ROI = (Cumulative Cash Flow + Equity Paydown + Appreciation) / Total Cash Invested × 100%
Monthly Mortgage Payment (P&I):
M = P × [r(1+r)n] / [(1+r)n − 1]
where P = loan amount, r = monthly rate (annual/12), n = total payments (years × 12)
All calculations are universal and pre-tax. No country-specific tax rates, depreciation rules, or mortgage insurance are applied. Results are estimates.
Worked Examples
Example 1 — $400K property, 20% down, leveraged cash flow analysis
A $400,000 single-family rental purchased with 20% down. Monthly rent $2,000, operating expenses ~$800/mo, 7% mortgage on $320,000 for 30 years.
With a 7% mortgage rate and relatively low rent, cash flow is negative — the mortgage costs more than the NOI generates. This is negative leverage: the cap rate (2.8%) is below the mortgage rate (7%). However, total ROI including appreciation and equity paydown can still be positive — see Example 3.
Example 2 — Same property all-cash: cap rate = ROI
The same $400,000 property purchased entirely in cash. No mortgage means all NOI goes to the investor.
With no mortgage, cash-on-cash ROI equals the cap rate. Cash flow is positive ($11,376/year). But the 10-year total ROI is ~40% on $413K invested — relatively modest because there is no leverage amplification on appreciation.
Example 3 — Leverage magic: $80K controls $400K of appreciation
The power of leverage shown through appreciation alone. Same $400,000 property with 20% down.
Even with negative cash flow, the total ROI is strong because 4% appreciation on $400,000 = $16,000/year, which is a 17.2% annual return on the $93,000 actually invested. This is the leverage amplification effect — you earn appreciation on the bank's money too. The key insight: cash-on-cash ROI can be negative while total ROI is strongly positive.
Understanding Rental Property ROI
Why Cash-on-Cash ROI Is Not Enough
Cash-on-cash ROI only measures annual cash flow relative to your investment. It misses two of the three ways rental properties build wealth: equity paydown and appreciation. A property with negative cash flow (cash-on-cash ROI below zero) can still be an excellent investment if appreciation is strong. Use the Total ROI tab for the complete picture.
Positive vs Negative Leverage
Positive leverage occurs when the property yield (cap rate) exceeds your borrowing cost (mortgage rate). In this case, every dollar borrowed earns more than it costs, and leveraged ROI exceeds the cap rate. Negative leverage is the opposite: the mortgage rate is higher than the cap rate, so borrowing actually reduces your cash flow. Even with negative leverage, total ROI including appreciation can be strong.
Key Metrics Explained
NOI (Net Operating Income): Rental income minus all operating expenses, but NOT including mortgage. This is the property's income regardless of how you financed it.
Cap Rate: NOI divided by purchase price. Ignores financing. Useful for comparing properties on an apples-to-apples basis.
Cash-on-Cash ROI: Annual cash flow (after mortgage) divided by total cash invested. Shows what your money actually earns in spendable income.
Total ROI: All three return sources (cash flow + equity paydown + appreciation) divided by cash invested. The true measure of investment performance.