Rental Property ROI Calculator
Calculate rental property ROI from purchase price, down payment, annual rent, expenses, expected appreciation, and holding period. Links: ROI calculator, Real Estate ROI, Marketing ROI, cap rate, What Is ROI?.
Rental Property ROI Calculator
Results
Rental ROI Formula
Annual Cash Flow = Annual Rent − Annual Expenses
Total investment = down payment (or full purchase for all-cash) plus closing costs. For total return: Total Gain = (Sale Price − Purchase Price) + (Annual Cash Flow × Years). Sale price is estimated using appreciation: Sale Price = Purchase × (1 + Appreciation/100)^Years. Total ROI = (Total Gain / Total Investment) × 100. Annualized ROI = [(1 + Total ROI/100)^(1/Years) − 1] × 100. See ROI formula and annualized return.
Cash Flow vs Equity Growth
Cash flow is the net income from rent after expenses and debt service. Equity growth comes from principal paydown and appreciation. A property can have negative cash flow but positive total return if appreciation is strong—a speculative bet. Cash-flow-positive properties provide ongoing income and reduce reliance on sale timing. See cash-on-cash return for leveraged yield.
Expense Considerations
Include property tax, insurance, maintenance (often 1% of value annually), property management (8–10% of rent), vacancy allowance (5–10%), and HOA if applicable. Excluding expenses inflates ROI. For net profit, use conservative estimates; actual costs often run higher than modeled.
Appreciation Assumptions
Appreciation is uncertain. Historical averages vary by market; past performance does not guarantee future results. Use conservative rates (e.g., 2–3%) or exclude appreciation for income-focused analysis. Downside scenarios (flat or negative appreciation) help stress-test the investment.
Risk Factors
Vacancy, tenant damage, extended maintenance, interest rate changes (for leveraged properties), and market cycles affect actual returns. Liquidity is lower than stocks; selling can take months. See ROI limitations for general caveats.
Example Property Scenario
Purchase $250,000, down payment $62,500, annual rent $24,000, expenses $8,000. Annual cash flow = $16,000 (all-cash) or less with debt. At 3% annual appreciation, value after 5 years ≈ $290,000. Total gain = $40,000 appreciation + $80,000 cash flow = $120,000. On $62,500 invested (assuming no closing): Total ROI = 192%, annualized ≈ 24%. Results depend on expense accuracy and appreciation realization.
Benchmark Ranges
| Strategy | Typical Range |
|---|---|
| Cash rental yield | 4–8% |
| Leveraged CoC | 8–15% |
| Total return (incl. appreciation) | 8–12%+ annualized |
Varies by market and property. Use Real Estate ROI guide for context.
Frequently Asked Questions
How do I calculate rental property ROI?
Rental ROI = [(Total Cash Flow + Appreciation) / Total Investment] × 100. Total cash flow = (Annual Rent − Annual Expenses) × Years. Use purchase price plus closing as total investment for all-cash.
Should I include appreciation in rental ROI?
For total return, yes. For income yield only, use cash flow. Appreciation is uncertain; many investors model conservatively or exclude it.
What expenses should I include for rental ROI?
Include property tax, insurance, maintenance, property management, vacancy allowance, HOA if applicable. Excluding expenses inflates ROI.
What is a good rental property ROI?
Cash rentals often target 6–8% or higher. Leveraged rentals may target 10–15% cash-on-cash. Compare to cost of capital and alternatives.