Real Estate ROI Calculator
Calculate annual return on investment, cash-on-cash return, monthly cash flow, and break-even for any property type.
Property Details
Your Results
Annual ROI
3.9%
Monthly Cash Flow
$142
Cap Rate
7.2%
Gross Yield
10.8%
Annual Breakdown
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How to Calculate Real Estate ROI
The basic ROI formula for real estate is: (Annual Net Income ÷ Total Investment) × 100. Annual net income is your gross rental income minus all expenses — mortgage payments, property taxes, insurance, maintenance, vacancy reserves, and management fees. Total investment includes your down payment, closing costs, and any upfront rehab.
For a more accurate comparison between deals, use cash-on-cash return — which measures only actual cash flow divided by actual cash invested. This is especially important for leveraged investments where two properties can have very different cash flows even at the same total ROI.
What Is a Good ROI for Real Estate?
Most buy-and-hold investors target 8–12% annual ROI as a benchmark for rental properties. Markets with higher appreciation potential (like major metros) often accept lower current cash flow in exchange for long-term price growth. Markets with stable, predictable rents (like secondary cities) tend to offer higher current yields.
Fix-and-flip investors calculate ROI differently — dividing total profit by total capital deployed per project. Most flippers target 20–30% ROI per deal, accounting for financing costs, holding time, and the cost of capital. Use InvestorVI's flip profit calculator for a full flip analysis.
Short-term rentals often outperform long-term rentals on ROI when managed well — but with significantly higher operational complexity. Use InvestorVI's STR investment analysis tool for a full vacation rental comparison.
Frequently Asked Questions
What expenses should I include in my ROI calculation?
Include all operating expenses: mortgage principal + interest, property taxes, insurance, maintenance (budget 1–2% of value annually), vacancy (5–10% of gross rent), property management (8–12% if applicable), HOA fees, and capital expenditure reserves (HVAC, roof, appliances).
Should I calculate ROI before or after tax?
Calculate both. Pre-tax ROI shows operating performance. After-tax ROI shows your actual take-home return, accounting for depreciation deductions, mortgage interest deductions, and capital gains treatment on sale. Consult a tax professional for deal-specific tax planning.
How is ROI different from cap rate?
Cap rate (capitalization rate) ignores financing — it measures a property's income potential as if purchased all-cash. ROI accounts for your specific financing terms and actual cash invested. Cap rate is better for comparing properties; ROI is better for measuring your actual return.
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