Free calculator
Rental Property ROI Calculator
Combine entered annual cash flow, principal paydown, and appreciation assumptions, then divide by total cash invested. The result is a modeled simple annual ROI—not IRR, market performance, or a realized return.
Use a property- and market-specific assumption. Negative values model depreciation.
Total ROI
25.47%
$19,100 annual modeled return on cash invested
Cash flow
7.20%
Principal
4.27%
Appreciation
14.00%
Modeled ROI of 18% or more — verify. Stress-test the assumptions behind this result, especially appreciation, cash flow, and cash invested.
The ROI formula explained
Total ROI = (Cash flow + Principal paydown + Appreciation) ÷ Cash investedThree components:
- Cash flow: rent minus all operating expenses minus mortgage. This is the money in your pocket each month, annualized.
- Principal paydown: the portion of each mortgage payment going to loan balance (not interest). This is equity build — invisible until you sell or refi.
- Appreciation: the value change implied by the annual rate you enter. It is uncertain and is not realized unless a future transaction supports it.
Sum the three and divide by cash invested (down payment + closing + initial rehab) to get a modeled simple annual return under the assumptions entered. It is not IRR or a realized return.
Worked example: $300k property, $75k cash invested. $5,400 annual cash flow + $3,200 principal paydown + $10,500 appreciation (3.5%/yr) = $19,100 total annual return. ROI = $19,100 ÷ $75k = 25.5%.
Frequently asked questions
What's the formula for rental property ROI?
Modeled simple annual ROI = (annual cash flow + annual principal paydown + assumed annual appreciation) ÷ total cash invested. Appreciation is an entered estimate, not cash received or a realized return.
What's a good ROI on a rental property?
There is no universal good ROI threshold. Compare the modeled result with your own Buy Box, financing, risk tolerance, workload, evidence quality, and alternative uses of capital.
How is total ROI different from cash-on-cash return?
Cash-on-cash uses annual cash flow divided by cash invested. This simple ROI estimate also adds entered principal paydown and appreciation assumptions, so it answers a different question and may be higher or lower depending on those inputs.
How is total ROI different from IRR?
This ROI is a simple one-year estimate. IRR uses the timing of multiple cash flows across a holding period and an assumed exit. The two metrics are not interchangeable.
Should I include tax savings in ROI?
This calculator excludes tax effects. Whether a deduction is available or currently usable depends on the property, ownership, activity rules, basis, and taxpayer. Use the full analyzer only for an illustrative tax scenario, and verify treatment with a qualified tax adviser.
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