Property ROI Calculator

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Formula: NOI / Total Property Cost

Cap Rate is the standard metric used to compare the profitability of different properties in a given market. It represents the unleveraged rate of return. Because it doesn't include financing, it allows for a true "apples-to-apples" comparison between properties. What's considered a "good" cap rate varies significantly by market.

3. Return on Investment (ROI) / Cash-on-Cash Return

Formula: Annual Cash Flow / Total Cash Invested

This is arguably the most important metric for you, the investor. It answers the question: "What return am I getting on the actual money I put into this deal?" This calculation (often called Cash-on-Cash Return) takes your financing into account and shows you how hard your invested cash is working for you.

What To Do With Your Results

Use these three metrics together to get a complete picture of the investment.

Use Cap Rate to Compare Properties

When you're looking at multiple properties in the same area, the Cap Rate is your best friend. It helps you identify which property has the best operational performance, regardless of how you plan to finance it.

Use ROI to Analyze Your Personal Return

Your ROI (Cash-on-Cash Return) is specific to your financing scenario. A deal with a lower Cap Rate might still produce a great ROI if you use favorable financing (like a low down payment). Many investors target a Cash-on-Cash ROI of 8-12% or higher.

Remember the Other Returns

This calculator focuses on the cash flow return. Your total return from a rental property also includes appreciation, loan paydown (equity), and tax benefits. However, a property should always be analyzed for positive cash flow first.