Rental & Investment · Formula v1.0.0
Rental Property ROI Calculator
Estimate annual return on a rental property, with a clear split between leveraged cash-on-cash return and unleveraged property ROI.
Cash-on-cash return (leveraged)
-1.62%
Annual pre-tax cash flow ÷ total cash invested
- Annual rental income
- $31,200
- Annual operating expenses
- $10,200
- Net operating income (NOI)Income minus operating expenses, before debt service
- $21,000
- Loan amount
- $300,000
- Annual debt service
- $22,754
- Annual pre-tax cash flow
- -$1,754.40
- Total initial investment
- $108,000
- Cash-on-cash return (leveraged)Cash flow ÷ total cash invested
- -1.62%
- Unleveraged property ROINOI ÷ (price + acquisition costs), ignores financing
- 5.15%
Rental ROI answers a simple question: for the cash you put into a rental property, what do you get back each year before taxes?
This calculator computes two different returns so they are never confused. The unleveraged ROI divides net operating income (NOI) by the total property cost, it treats the purchase as if you paid all cash. The cash-on-cash return divides the annual pre-tax cash flow (after mortgage payments) by the cash you actually invested.
Leverage can make cash-on-cash return higher or lower than unleveraged ROI depending on whether the property's operating yield is above or below the mortgage rate.
Cash-on-Cash Return = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100 · Unleveraged ROI = NOI ÷ (Price + Acquisition Costs) × 100
NOI: Annual rental income minus operating expenses, before any mortgage payments.
Total cash invested: Down payment plus acquisition costs.
Annual pre-tax cash flow: NOI minus annual debt service (principal + interest).
You buy a $400,000 rental with $100,000 down and $8,000 acquisition costs. Rent is $2,600/month; operating expenses $850/month. NOI = ($2,600 − $850) × 12 = $21,000.
Financing $300,000 at 6.5% for 30 years costs about $1,896.20/month, $22,754/year in debt service. Annual cash flow = $21,000 − $22,754 = −$1,754, a −1.62% cash-on-cash return.
Unleveraged ROI = $21,000 ÷ $408,000 = 5.15%. The comparison shows leverage currently reduces cash return in this scenario.
- •First-year, pre-tax estimate; ignores vacancy unless you include it in operating expenses.
- •Assumes a fixed-rate amortizing mortgage with monthly payments.
- •Does not model loan amortization benefits, tax shelters, or capital expenditures.
Formula reference
Cash-on-Cash Return = (Annual Pre-Tax Cash Flow ÷ Total Cash Invested) × 100 · Unleveraged ROI = NOI ÷ (Price + Acquisition Costs) × 100
- NOI, Annual rental income minus operating expenses, before any mortgage payments.
- Total cash invested, Down payment plus acquisition costs.
- Annual pre-tax cash flow, NOI minus annual debt service (principal + interest).