Rental Property ROI Calculator
Calculate rental property returns, cap rate, and cash-on-cash ROI.
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What is Rental Property ROI?
Rental property ROI measures the profitability of a real estate investment. It considers rental income, operating expenses, mortgage payments, and the total cash invested. Key metrics include cash-on-cash return (return on actual cash invested), cap rate (return independent of financing), and total ROI (including appreciation and principal paydown).
How to Calculate Rental ROI
Cash-on-Cash Return = Annual Cash Flow / Total Cash Invested. Annual Cash Flow = (Monthly Rent × 12) - Operating Expenses - Annual Mortgage Payments. Total Cash Invested = Down Payment + Closing Costs + Initial Repairs. Example: $200K property, $2K/month rent, $12K expenses, $10K mortgage, $40K invested: Cash flow = $24K - $12K - $10K = $2K. CoC = $2K / $40K = 5%.
What is a Good Rental Property ROI?
Cash-on-cash return: 8-12% is considered good. Cap rate: 5-10% depending on market (higher in secondary markets, lower in prime areas). Total ROI (including appreciation and principal paydown): 15-20%+ is excellent. Compare to alternative investments: S&P 500 averages 10% annually.
Key Rental Property Expenses
- •Operating expenses include: property taxes (1-2% of value), insurance (0.3-0.5%), maintenance (1-2%), property management (8-10% of rent), vacancy (5-10% of rent), HOA fees (if applicable), and utilities (if landlord-paid). Budget 30-50% of gross rent for operating expenses.
Rental Property Investment Mistakes
Not accounting for vacancy (budget 5-10% of rent). Underestimating maintenance costs (older properties cost more). Not screening tenants properly (bad tenants cause damage and missed rent). Buying in declining neighborhoods (location is everything). Ignoring property management costs (even if self-managing, value your time).
Comparison Analysis
Rental Property ROI Metrics ($200,000 property, $2,000/month rent)
| Criteria | Cash-on-Cash | Cap Rate | Total ROI |
|---|---|---|---|
| Formula | Cash Flow / Cash Invested | NOI / Property Value | Cash Flow + Appreciation + Principal / Cash Invested |
| Example Result | 5% | 6% | 15% |
| Includes Financing | Yes | No | Yes |
| Includes Appreciation | No | No | Yes |
| Best For | Cash flow analysis | Property comparison | Total return assessment |
Content Verification
Expert Review
Reviewed by Aisha Rahman, CFA, CIMA—Investment Strategist with real estate portfolio experience
Authoritative Sources
Based on NAR data, FHFA housing statistics, and established real estate investment analysis
Last Reviewed
Content verified May 2026 against current rental market conditions and property expense benchmarks