Numbers never lie, but only if you put the right ones in. Our Property ROI Calculator is a powerful tool designed to help you analyze the profitability of a potential investment property. This guide will walk you through each input of the calculator and explain how to interpret the results to make smarter investment decisions.

Understanding the Inputs

Garbage in, garbage out. To get an accurate forecast of your investment's performance, you need to understand exactly what each field represents.

1. Purchase Price

This is the straightforward cost of acquiring the property. It's the number on the contract. Remember, in competitive markets, this might be higher than the asking price.

2. Closing & Other Costs

Often overlooked by beginners, these are the fees associated with sealing the deal. They typically include:

  • Loan origination fees (0.5% - 1% of loan amount)
  • Appraisal and inspection fees ($500 - $1,000)
  • Title insurance and legal fees
  • Prepaid taxes and insurance

Rule of Thumb: Budget 2% to 5% of the purchase price for closing costs.

3. Renovation Costs

This is your budget for any repairs or improvements needed before renting. Accuracy is key here. Always get at least three quotes from contractors and add a 10-15% contingency fund for unexpected surprises.

4. Monthly Rent

The lifeblood of your investment. Research comparable rental properties ("comps") in the immediate area (0.5 mile radius) to determine a realistic rate. Don't guess—check Zillow, Rentometer, or ask a local property manager.

5. Annual Property Taxes

Taxes vary wildly by location. Check the county assessor's website for the most recent tax bill. Note: In some states, the property tax will jump significantly upon sale based on the new purchase price.

6. Annual Maintenance & Vacancy

Real estate isn't passive; things break and tenants leave. You must budget for this.

  • Maintenance: Budget 1% of the property value per year, or 5-10% of rent.
  • Vacancy: Assume the property will be empty for 1 month per year (8.3% of income) or check local vacancy rates.

Interpreting the Results

Net Operating Income (NOI)

Formula: Total Income - Operating Expenses

NOI is the pure profitability of the property irrespective of financing. It tells you how good the deal is at its core.

Capitalization Rate (Cap Rate)

Formula: NOI / Purchase Price

Cap Rate is the gold standard for comparing properties. It represents your return if you paid all cash. A higher cap rate generally indicates a better return, but also potentially higher risk. In 2025, a Cap Rate of 5-7% is considered solid in many residential markets.

Return on Investment (ROI) / Cash on Cash Return

Formula: Annual Pre-Tax Cash Flow / Total Cash Invested

This is the "Holy Grail" metric for most investors using leverage. It tells you exactly how hard your actual dollars (down payment + closing costs + rehab) are working for you. Most investors aim for a Cash on Cash return of 8-12% or higher.