Investment Property ROI Calculator
Analyze any rental property investment with all key metrics: cash-on-cash return, cap rate, NOI, DSCR, GRM, and 10-year IRR. See cash flow under optimistic, realistic, and conservative scenarios.
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$20%
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% of rent
% of value/yr
Annual Cash Flow
-$17,799
-$1,483/month · Cash-on-cash: -29.66%
Cap Rate
0.62%
Cash-on-Cash Return
-29.66%
NOI
$1,848/yr
DSCR
0.09x
Mortgage: $19,647
Property Tax: $3,600
Insurance: $1,200
Management: $2,640
Maintenance: $15,000
Advanced
Advanced Return Metrics
All investment metrics in one view, leverage impact, expense scenarios
All standard investment property metrics calculated from your inputs — in one place.
Cap Rate
0.62%
NOI / purchase price. Good: 5-8%+
Cash-on-Cash Return
-29.66%
Annual cash flow / down payment
Gross Rent Multiplier
11.4x
Price / annual gross rent. Lower = better
Net Operating Income
$1,848
Annual rent (after vacancy) − operating expenses
Debt Service Coverage
0.09x
NOI / annual debt service. Lenders want 1.25x+
Effective Gross Income
$24,288
Gross rent × 92% occupancy
Total Operating Expenses
$22,440
85% of gross rent
Total Return (1st Year)
-26.16%
Cash flow + 1yr appreciation on down payment
Lender qualification note: Most lenders require a DSCR of at least 1.20-1.25x for investment property loans. Your current DSCR is 0.09x — below 1.0 — the property does not generate enough income to cover debt service.
Pro
Professional ROI Simulator
10-year IRR model with appreciation, cash flow, equity, and tax benefits
years
%
%
%
%
10-Year Internal Rate of Return (IRR)
-1.28%
IRR accounts for cash flow, equity paydown, appreciation, and tax benefits
Sale Price (Yr {holdYears})
$423K
3.5%/ yr appreciation
Net Sale Proceeds
$190,644
After 6% selling costs and mortgage payoff
Total Rental Cash Flow
-$132,591
Over 10 years (before sale)
Total Return
$58,053
Cash flow + sale proceeds
Return on Investment
96.8%
Total return / $60,000 invested
Annual Depreciation Shield
$2,318
Tax benefit from depreciation deduction
How to Use This Investment Property ROI Calculator
Enter your property details and income/expense estimates to get a complete picture of investment returns:
- Purchase Price & Down Payment: Investment properties typically require 20-25% down. A larger down payment improves cash flow but reduces leverage.
- Monthly Rent: Use current market rents for comparable units in the area, not your asking price. Check Zillow, Rentometer, or local listings.
- Vacancy Rate: The percentage of time the property sits empty. National average is 5-8%. Use 10% for conservative planning in uncertain markets.
- Property Management: If self-managing, set to 0%. Professional management typically runs 8-12% of collected rent plus leasing fees.
- Maintenance Reserve: Budget 5-10% of purchase price per year for investment properties (more than primary residences, due to tenant wear).
Key Investment Property Metrics Explained
Cap Rate = NOI / Purchase Price × 100
(measures property return, ignores financing)
Cash-on-Cash Return = Annual Cash Flow / Cash Invested × 100
(measures return on your actual cash)
DSCR = NOI / Annual Debt Service
(lender qualification: needs ≥ 1.25x)
GRM = Purchase Price / Annual Gross Rent
(quick screening tool; lower = better value)
(measures property return, ignores financing)
Cash-on-Cash Return = Annual Cash Flow / Cash Invested × 100
(measures return on your actual cash)
DSCR = NOI / Annual Debt Service
(lender qualification: needs ≥ 1.25x)
GRM = Purchase Price / Annual Gross Rent
(quick screening tool; lower = better value)
Which Metric Matters Most?
Cap rate lets you compare properties regardless of financing. Use it to compare deal quality across markets.
Cash-on-cash return tells you how your cash is actually performing. It's the most relevant metric for leveraged investors and should ideally be 8-12%+.
IRR (Internal Rate of Return) is the most complete metric — it accounts for all cash flows over time, including the eventual sale proceeds, depreciation tax benefits, and rent growth. Most serious investors target 12-15%+ IRR.
The 1% Rule and 50% Rule
Investors use quick rules to screen properties before running full calculations:
Quick Screening Rules
| The 1% Rule | Monthly rent should be ≥ 1% of purchase price. A $300,000 property needs $3,000/month rent. This ensures positive cash flow in most markets. |
| The 50% Rule | Assume 50% of gross rent goes to operating expenses (taxes, insurance, management, maintenance, vacancy). The other 50% covers debt service and cash flow. |
| GRM Rule | Properties trading at GRM below 10-12x are typically better values. Above 15x suggests the rent doesn't support the price. |
These rules are quick screens — not replacements for full analysis. High-cost markets often can't meet the 1% rule but still appreciate well.
Understanding Leverage in Real Estate
Financing amplifies returns when the property performs above the cost of debt. This is called positive leverage:
- If your cap rate (7%) exceeds your interest rate (6.5%), leverage increases your cash-on-cash return above the cap rate.
- If your interest rate (7%) exceeds your cap rate (5.5%), leverage actually reduces your cash-on-cash return — you'd earn more buying all-cash.
- Leverage also amplifies losses: a leveraged property in a declining market can go deeply negative quickly.
The key metric is the spread between cap rate and debt cost. When rates are high and cap rates are compressed, leverage works against you.
Frequently Asked Questions
A good cash-on-cash return is 8-12% or higher. Cap rates of 5-8% are acceptable depending on the market. IRR of 12-15%+ over a 10-year hold is a solid target when combining cash flow, appreciation, and equity. In expensive markets, investors often accept lower current returns in exchange for strong appreciation prospects.
DSCR (Debt Service Coverage Ratio) = NOI / Annual Mortgage Payments. Lenders want to see 1.20-1.25x or higher, meaning the property generates 20-25% more income than it costs in debt payments. A DSCR below 1.0 means the property's income doesn't cover its mortgage — a red flag for lenders.
Common omissions: vacancy allowance (most beginners assume 100% occupancy), capital expenditure reserves (roof, HVAC, water heater — big costs happen), leasing fees (1 month's rent each time you place a tenant), landlord insurance (not homeowner's insurance), and turnover costs between tenants (cleaning, repairs, advertising).
Cash flow is the monthly/annual dollars left after all expenses and mortgage payments. ROI (return on investment) is a percentage — cash flow divided by your invested capital. A property can have low cash flow but high ROI if you put a small amount down. Total ROI also includes equity buildup and appreciation, not just cash flow.
The IRS allows you to depreciate the structure (not land) over 27.5 years for residential rental property. On a $300,000 property where land is worth $50,000, you can deduct $250,000 / 27.5 = $9,091/year from taxable income. At a 25% tax rate, this saves $2,273/year — a significant "phantom loss" that can shelter rental income from taxes.