Rental property ROI calculator
Estimate one year's total return on a rental property: cash flow, plus equity from paying down the loan, plus appreciation, as a share of the cash you invested.
Your results
EstimateAnnual ROI: 25.71%
- Total annual return
- $18,000.00
- Annual cash flow
- $6,000.00
- Equity from principal paydown
- $3,000.00
- Appreciation
- $9,000.00
Results are estimates for planning only. They are not legal, tax or investment advice, and they apply no state or local rules. Check your lease, your local laws and a qualified professional before you rely on a number.
How rental property ROI is calculated
ROI = (annual cash flow + principal paid down + appreciation) / total cash invested
Annual cash flow is rent minus operating expenses and the mortgage payment, over 12 months. Principal paid down is the part of your loan payments that reduced the balance this year, which your lender's amortization schedule shows. Appreciation is the property value times the growth rate you expect.
Cash flow is money in hand, while paydown and appreciation build equity you collect when you sell or refinance. Appreciation is a forecast, so try a few rates to see how much the result depends on it.
Worked example
You invested $70,000 in cash. The rent is $2,500 a month, operating expenses are $900 and the mortgage is $1,100. This year's payments reduce the loan by $3,000, and the $300,000 property appreciates 3%.
- Annual cash flow: ($2,500 - $900 - $1,100) x 12 = $6,000.
- Appreciation: $300,000 x 3% = $9,000.
- Total return: $6,000 + $3,000 + $9,000 = $18,000.
- ROI: $18,000 / $70,000 = 0.2571.
The estimated annual ROI is 25.71%.
Frequently asked questions
What is a rental property ROI?
Return on investment for a rental is the total gain over a period divided by the cash you invested. This calculator counts one year of cash flow, loan paydown and appreciation.
How is ROI different from cash on cash return?
Cash on cash return counts only cash flow. ROI here also counts the equity you build by paying down the loan and the value the property gains.
Where do I find my principal paydown?
Your mortgage statement or the lender's amortization schedule splits each payment into principal and interest. Add up the principal portions for the year.
Does ROI account for selling costs or taxes?
No. It leaves out selling costs, income taxes and depreciation. Those depend on when you sell and on your tax situation.
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