Rental Property ROI Calculator
Cash flow, loan paydown, and appreciation added together, annualized over how long you hold.
Three sources of return, added together. Quoting cash-on-cash alone understates rentals by ignoring the tenant paying down your loan; quoting appreciation alone overstates them by ignoring carrying costs. Cash flow is treated as received and not reinvested.
Rental property pays you three ways at once, and most quoted returns count only one of them. Cash flow is the money left after the mortgage. Loan paydown is equity your tenant builds for you every month. Appreciation is the change in the property’s value. Quote cash-on-cash alone and you understate the result; quote appreciation alone and you ignore what it cost to carry.
Worked example. Take the same $250,000 property at 25% down, 6.5%, with $15,940 of NOI and $8,000 of upfront costs, held five years with 3% annual appreciation. Cash flow contributes about $8,592, loan paydown adds $11,979, and appreciation adds $39,819. That is $60,390 of profit on $70,500 invested, an annualized return of 13.2%, from a property whose cash-on-cash return alone is 2.4%.
Frequently asked questions
What appreciation rate should I assume?
Long-run US home price growth has been roughly in line with inflation plus a little, so 2 to 3% is a defensible default. Any deal that only works at 6% appreciation is a bet on the market rather than an investment in a property. Run it at 0% to see the floor.
Why does loan paydown count as return?
Because each payment converts cash into equity you keep when you sell. It is real, but it is illiquid: you cannot spend it without selling or refinancing, which is why it should not be confused with cash flow.
Does this account for selling costs or taxes?
No. Agent commissions and closing costs on a sale typically run 6 to 8% of the price, and capital gains plus depreciation recapture apply unless you exchange into another property. Both reduce the realised figure meaningfully, so treat this as a pre-tax, pre-sale-cost view.
Is cash flow reinvested in this calculation?
No, it is treated as received and left alone. Reinvesting it would raise the annualized figure, but at a rate that depends on where you put it, which is a separate assumption we would rather not bury in this one.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.