Real Estate ROI Calculator

Cash invested = down payment + closing + rehab. Annual cash flow = rent − vacancy − operating expenses − mortgage payment. Cash-on-cash = year-1 cash flow ÷ cash invested. Total ROI = (all cash flow + net sale proceeds − cash invested) ÷ cash invested. IRR solves the dated cash flows — the outlay, the annual cash flows and the sale. NOI (rent − operating expenses) ÷ price is the cap rate.

Four returns in one investment

A rental property pays you four ways, and judging it on any one alone is a mistake. There is the cash flow — the rent left after expenses and the mortgage. There is appreciation — the property gaining value over time. There is loan paydown — your tenants steadily retiring your mortgage, building equity you did not pay for. And there is the lump at sale. A property can have weak or even negative cash flow yet be an excellent investment once appreciation and paydown are counted — or look fine on rent but disappoint after costs. This calculator adds all four into the figures professional investors use, and shows how much of your return comes from each source.

The headline numbers are the total ROI over your hold, the cash-on-cash return (year-one cash flow on your invested cash), the cap rate (the unleveraged yield), and the IRR — the annualised return that accounts for the timing of every cash flow and the sale. Together they tell you not just whether the deal makes money, but how, and how efficiently.

Worked example — a $350,000 rental, 25% down, $2,500 rent, held 10 years at 7% on the loan: Year-one cash flow is slightly negative (about −$1,600) because the mortgage is heavy, and the cash-on-cash return is around −1.6%. But with 3.5% appreciation and tenant paydown, the total profit over 10 years is roughly $152,000 on $98,000 invested — a 155% total ROI and an IRR near 9.8%.

Leverage, cap rate and cash-on-cash

Notice what the mortgage does. With a loan, the year-one cash flow can be thin or negative, yet the IRR is higher than buying all-cash — because leverage lets a smaller amount of your money control the whole asset, so the appreciation and paydown work on a larger base. Set the down payment to 100% and compare: the all-cash version has healthy cash flow and a solid cap rate, but a lower IRR. Leverage amplifies returns (and risk) — the calculator lets you see both sides by changing the down payment.

The cap rate — net operating income divided by price — deliberately ignores the mortgage, so it measures the property itself rather than your financing. It is the right tool for comparing properties; cash-on-cash and IRR then layer your specific financing on top. A low cap rate with a high IRR means you are relying on appreciation and leverage, not the rent — which is fine if you understand the risk you are taking.

Expenses, the sale and tax

Cash flow lives or dies on the expense assumptions, and new investors routinely underestimate them. Beyond the mortgage there is property tax, insurance, maintenance, management, and — easiest to forget — vacancy, the share of the year the unit sits empty. The defaults here are broadly realistic, but tune them to your market; a property that cash-flows on paper at 0% vacancy and no management often does not in reality. At the other end, selling costs of around 6% take a real bite out of the gain, which is why short holds rarely pay.

For US investors, tax changes the picture in your favour during the hold and against you at sale. Depreciation lets you deduct a slice of the building’s value each year, often turning a taxable profit into a paper loss that shelters income; but when you sell, that depreciation is recaptured and the gain is taxed. Enter your tax rate to see an indicative after-tax ROI — lower than the pre-tax figure, but more honest. The year-by-year table and the stacked chart show how cash flow, appreciation and paydown accumulate across the hold.