Rental Property ROI Calculator

A good cash-on-cash return for rental properties is typically 8-12% annually. However, this varies significantly by market, property type, and investment strategy. In high-appreciation markets (like Austin or Denver), investors may accept lower cash-on-cash returns (4-6%) because they expect property values to increase. In cash-flow markets (like Indianapolis or Columbus), 10-15% cash-on-cash returns are more common but appreciation is slower. Always evaluate ROI alongside other metrics like cap rate, total return, and break-even occupancy.

There are several ROI metrics for rental properties. Cash-on-cash return = annual cash flow divided by total cash invested (down payment + closing costs). Cap rate = net operating income (NOI) divided by purchase price. Total return includes cash flow plus equity buildup plus appreciation. This calculator computes all three. The most commonly used metric among investors is cash-on-cash return because it measures the return on your actual out-of-pocket investment.

Cap rates vary by market and property type. Generally, 4-6% is typical for low-risk markets with strong appreciation potential, 6-8% is average for most residential rental markets, and above 8% may indicate higher risk or an undervalued property. Cap rate is useful for comparing properties quickly, but it does not account for financing — use cash-on-cash return for a more complete picture of your actual returns.

Include: mortgage payment (principal + interest), property taxes, insurance, property management (typically 8-12% of rent even if self-managed — it accounts for your time), maintenance reserve (5-10% of rent), vacancy reserve (5-8% of rent in most markets), HOA fees if applicable, and any utilities you pay as landlord. Common mistakes include underestimating maintenance costs and not accounting for vacancy. This calculator includes all standard expense categories.