About the Real Estate ROI Calculator
This real estate ROI calculator measures the full return on a rental property over the time you plan to own it. It combines the three ways a rental makes money — monthly cash flow, mortgage principal paid down by tenants, and appreciation — and subtracts selling costs at the end, then divides the profit by the cash you invested (down payment, closing costs and rehab).
Alongside total and annualized ROI it reports the year-one numbers investors compare listings with: monthly cash flow, cash-on-cash return, net operating income and cap rate. Use it to compare a rental with other investments, to decide how long to hold, or to see how much of your return depends on appreciation rather than rent.
Rent and expenses are held flat in today’s dollars for simplicity, the loan is a fixed-rate mortgage, and the annualized figure treats all cash as received at sale, so it is an approximation of IRR (slightly low when cash flow is positive, slightly high when it is negative). Operating expenses should include property tax, insurance, repairs, management, HOA and a capital-expenditure reserve.
With the default inputs, the total roi over holding period is 65.2%. Change any value above to recalculate instantly.
How to use the real estate roi calculator
- 1Enter the purchase price, down payment, closing costs and any upfront repairs.
- 2Enter the mortgage rate and term.
- 3Add monthly rent, operating expenses and a vacancy allowance.
- 4Choose an appreciation rate, holding period and selling cost percentage.
- 5Compare total and annualized ROI with your other investment options.
Formula and method
Year-one figures come first: rent after vacancy minus operating expenses is NOI (the basis of the cap rate), and NOI minus the mortgage payment is cash flow. Cash-on-cash return divides annual cash flow by the cash you invested — down payment, closing costs and repairs.
For the holding period the property value compounds at the appreciation rate, the loan balance follows the amortization schedule, and at sale the selling costs and remaining balance are subtracted. Total ROI adds all cash flow to those net proceeds, subtracts the original investment and divides by it. The annualized ROI converts that multiple into a compound yearly rate; because it assumes every dollar arrives at the end, it slightly understates the true IRR when cash flow is positive and overstates it when cash flow is negative.
- g
- Annual appreciation rate
- t
- Holding period in years
- P&I
- Monthly mortgage principal and interest
- Cash invested
- Down payment + closing costs + repairs
Worked examples
$300k rental, 20% down, held 5 years
Rent of $2,400 less 5% vacancy and $650 expenses gives NOI of $19,560 (a 6.52% cap rate). After the $1,516.96 mortgage, cash flow is $113 a month. After five years at 3% the home sells for about $347,782; net of 6% costs and the $224,666 balance you receive $102,249. With $6,782 of cash flow, profit on the $66,000 invested is $43,031 — 65.2% total, about 10.6% a year.
$250k fixer with $15k repairs held 10 years
You invest $70,000 including repairs. Cash flow is about $271 a month and the cap rate 7.37%. After 10 years at 4% the home is worth about $370,061; net of costs and the $169,552 balance you receive $178,305, for a $140,809 profit — a 201% total return, or 11.7% a year.
Negative cash flow, low appreciation
A $300,000 loan at 7% costs $1,995.91 a month, so the property loses about $421 monthly ($35,356 over seven years). Net sale proceeds of $158,464 barely outweigh that, leaving a $15,107 profit on $108,000 — under 2% a year.
Frequently asked questions
How do you calculate ROI on a rental property?+
Add up all the money the property returns — cash flow plus net sale proceeds (sale price minus selling costs and loan payoff) — subtract the cash you invested, and divide by that investment. For year-one returns, cash-on-cash (annual cash flow ÷ cash invested) is the common shortcut.
What is a good ROI for rental property?+
Many investors look for total annualized returns of roughly 8%–12% or more, and year-one cash-on-cash returns of about 6%–10%. Acceptable returns depend on risk, location, leverage and how much of the return relies on appreciation.
What is the difference between ROI, cap rate and cash-on-cash?+
Cap rate is NOI ÷ price and ignores financing. Cash-on-cash is annual cash flow after the mortgage ÷ cash invested, for one year. ROI here covers the whole holding period, including loan paydown, appreciation and selling costs.
Why is my ROI positive when cash flow is negative?+
Tenants still pay down the loan and the property may appreciate. Those gains arrive when you sell or refinance, so a property can show positive total ROI while costing you money every month — a riskier position if rents fall or repairs spike.
Does this include taxes and depreciation?+
No. Results are before income tax. Depreciation deductions can shelter rental income, but depreciation recapture and capital gains tax apply at sale. Use the rental depreciation calculator and a tax adviser for after-tax returns.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.