Rental ROI Calculator – Calculate Return on Investment for Rental Properties
Evaluate the profitability of rental properties with our free rental ROI calculator. Factor in purchase price, monthly rent, expenses, and loan costs to calculate annual return on investment. Essential for real estate investors and landlords.
Rental ROI measures the return you earn from a rental property investment. It helps you compare different investment opportunities and determine if a property is worth buying.
Key Formulas
ROI Benchmarks
| Cash ROI | Assessment | Action |
|---|---|---|
| > 10% | Excellent | Strong buy |
| 7-10% | Good | Consider buying |
| 4-7% | Average | Negotiate price |
| < 4% | Poor | Look elsewhere |
Example Calculation
Purchase: $300,000 | Down: $60,000 | Rent: $2,500/month
Annual Rent: $30,000 | Gross Yield: 10%
After EMI and expenses: Net $12,000/year
Cash ROI: $12,000 / $60,000 = 20%
Enter values and calculate to see the chart
Enter values and calculate to see the chart
- Location matters more than property features for rental demand
- Calculate all expenses: taxes, insurance, maintenance, vacancy
- Aim for positive cash flow from day one
- Consider appreciation potential in growing areas
- Screen tenants carefully to avoid payment issues
- Keep 3-6 months of expenses as emergency fund
Frequently Asked Questions
What is a good ROI for rental property?
A good cash-on-cash ROI is 8-12% or higher. Total ROI including appreciation of 10-15% is excellent. Below 5% may not justify the investment risk and effort.
How is rental ROI different from cap rate?
Cap rate uses the full property price. ROI uses your actual cash invested (down payment). ROI is higher when using leverage because you control a large asset with less cash.
Should I include appreciation in ROI?
It depends on your analysis. Cash ROI shows current income. Total ROI includes appreciation for long-term wealth building. Both metrics are useful for different decisions.
What expenses should I include?
Include property tax, insurance, maintenance (1% of value/year), property management (8-12% of rent), HOA fees, and vacancy allowance (5-10% of rent).
How much should I put down on a rental?
Investment properties typically require 20-25% down. More down payment reduces monthly costs but lowers cash-on-cash ROI. Balance leverage benefits against risk.
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