Rental Property ROI Calculator
See if a rental property is worth buying. Calculate your return on investment before you commit.
How the Rental Property ROI Calculator works
Enter purchase price, rental income, and expenses. Get your ROI percentage and cash flow to make smarter investment decisions.
Most rental properties look good on paper but lose money in reality. This calculator shows you the real numbers before you buy.
How it works
Tutorial
Rental property ROI (Return on Investment) tells you how much profit you’re making compared to what you invested. A good rental property should generate positive cash flow and deliver returns of 8-12% or higher to be worth the effort and risk.
Use the calculator above for quick results, or follow this guide to calculate ROI manually.
The Formula
| Metric | Formula |
|---|---|
| Annual Rental Income | Monthly Rent × 12 |
| Total Annual Expenses | Mortgage + Taxes + Insurance + Maintenance + Vacancy + Management |
| Annual Cash Flow | Rental Income – Total Expenses |
| Total Investment | Down Payment + Closing Costs + Repairs |
| ROI Percentage | (Annual Cash Flow ÷ Total Investment) × 100 |
Step-by-Step Example
Let’s analyze a typical rental property investment.
Step 1: Calculate Annual Rental Income
| Component | Amount |
|---|---|
| Monthly Rent | $2,200 |
| Months per Year | × 12 |
| Gross Annual Income | $26,400 |
Calculation:$2,200 × 12 =$26,400
Step 2: Calculate Annual Expenses
| Expense | Annual Amount |
|---|---|
| Mortgage Payment ($1,432/month) | $17,184 |
| Property Tax | $3,000 |
| Insurance | $1,200 |
| Maintenance (5% of rent) | $1,320 |
| Vacancy (5% of rent) | $1,320 |
| Property Management (8% of rent) | $2,112 |
| Total Annual Expenses | $26,136 |
Calculation:$17,184 + $3,000 + $1,200 + $1,320 + $1,320 + $2,112 =$26,136
Step 3: Calculate Annual Cash Flow
| Component | Amount |
|---|---|
| Gross Annual Income | $26,400 |
| Total Annual Expenses | -$26,136 |
| Annual Cash Flow | $264 |
Calculation:$26,400 – $26,136 =$264
Step 4: Calculate Total Investment
| Component | Amount |
|---|---|
| Purchase Price | $300,000 |
| Down Payment (20%) | $60,000 |
| Closing Costs (3%) | $9,000 |
| Initial Repairs | $8,000 |
| Total Investment | $77,000 |
Calculation:$60,000 + $9,000 + $8,000 =$77,000
Step 5: Calculate ROI
| Component | Value |
|---|---|
| Annual Cash Flow | $264 |
| Total Investment | ÷ $77,000 |
| ROI Decimal | 0.00343 |
| ROI Percentage | 0.34% |
Calculation:($264 ÷ $77,000) × 100 =0.34%
Bottom Line:This property generates only$264 per yearin cash flow, for an ROI of just0.34%. This is a poor investment.
What This Means
An ROI under 1% means your money would earn more in a savings account. Good rental properties typically deliver 8-12% ROI or higher. This example shows why you need to run the numbers carefully – many properties that seem profitable actually barely break even or lose money once you account for all expenses. Always include vacancy, maintenance, and management costs in your analysis, as these are often overlooked but add up significantly.
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