Rental Property ROI Calculator
Calculate Year-1 Cash-on-Cash Return, cumulative multi-year operating cash flow, total holding-period ROI, and annualized ROI including optional net exit sale proceeds.
Initial Cash Invested & Annual Returns
Rental Property ROI & Cash-on-Cash Formulas
Cash-on-Cash % = (Annual Pre-Tax Cash Flow รท Initial Investment) ร 100 | Total Period ROI % = [(Cumulative Cash Flow + Net Sale Gain) รท Initial Investment] ร 100- Annual Pre-Tax Cash Flow = Annual Rental Income โ Annual Operating Expenses โ Annual Financing Costs.
- Net Gain From Sale Exit = Estimated Net Sale Proceeds at Exit โ Initial Cash Investment (or $0 if exit proceeds are omitted).
- Annualized Simple ROI (%) = Total Holding-Period ROI % รท Holding Period Years.
Step-by-Step Worked Example
Calculation Steps:
- Year-1 Cash-on-Cash Return = ($7,200 รท $85,000) ร 100 = 8.47%
- 5-Year Cumulative Cash Flow = $7,200 ร 5 = $36,000; Net Exit Gain = $115,000 โ $85,000 = $30,000
- Total Net Profit = $36,000 + $30,000 = $66,000 โ Total ROI = ($66,000 รท $85,000) ร 100 = 77.65% (15.53%/yr)
How to Use This Calculator
- 1Enter your total initial cash investment (down payment + closing costs + upfront rehab).
- 2Enter annual rental income, annual operating expenses (excluding mortgage), and annual mortgage financing costs.
- 3Set your holding period in years and estimated net sale proceeds at exit.
Assumptions & Limitations
- Clearly states the ROI definition used: separates Year-1 Cash-on-Cash Return from cumulative holding-period ROI.
- Pre-tax educational calculation; consult a tax advisor regarding depreciation deductions and capital gains taxes.
Frequently Asked Questions
What is included in Initial Cash Investment?
Include all out-of-pocket cash required to acquire and stabilize the property: your mortgage down payment, buyer closing costs, loan origination points, and immediate renovation or make-ready costs.
How does leverage increase Rental Property ROI?
When a propertyโs net operating return exceeds the cost of mortgage borrowing, financing allows you to control a larger appreciating asset with less upfront cash, magnifying percentage returns on your invested equity.
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