TFT

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.

Understanding Rental ROI

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

Gross Yield = (Annual Rent / Purchase Price) × 100%
Net Income = Annual Rent - Annual EMI - Annual Expenses
Cash-on-Cash ROI = (Net Income / Down Payment) × 100%
Total ROI = Cash ROI + Property Appreciation

ROI Benchmarks

Cash ROIAssessmentAction
> 10%ExcellentStrong buy
7-10%GoodConsider buying
4-7%AverageNegotiate price
< 4%PoorLook 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%

ROI Comparison

Enter values and calculate to see the chart

5-Year Wealth Projection
Cash flow and property value growth over time

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Investment Tips
  • 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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