Rental Property ROI Calculator
See a rental's total return — not just monthly cash flow. Get first-year cash-on-cash, annualized IRR, and your full profit broken down into cash flow, appreciation, and loan paydown over the years you hold it.
On $65,800 invested, assuming a sale in year 5.
Where the return comes from
Every rental return has four engines and two costs. Here is how they add up over your 5-year hold.
Year by year
| Year | Cash flow | Property value | Equity |
|---|---|---|---|
| 1 | $4,000 | $242,050 | $67,590 |
| 2 | $4,542 | $249,312 | $76,772 |
| 3 | $5,101 | $256,791 | $86,310 |
| 4 | $5,676 | $264,495 | $96,221 |
| 5 | $6,268 | $272,429 | $106,522 |
Estimates for education only, not investment, tax, or legal advice. Returns depend heavily on your rent, appreciation, and hold assumptions — edit them to see the range.
The four engines of rental return
A rental doesn't make money one way — it makes money four ways at once, which is why simple "cash flow only" math understates the real return. This calculator adds them up and subtracts the costs.
Rental cash flow
The money left over each month after every expense and reserve — paid to you the entire time you hold the property.
Loan paydown
Your tenants retire the mortgage for you. Every payment converts a little more debt into equity, invisibly building your return.
Appreciation
If the property gains value, that gain is amplified by leverage — you control the whole asset with only your down payment.
Costs
Closing costs going in and selling costs coming out pull against the return. A good ROI figure counts them; many quick calculators don't.
First-year return vs. total return
Cash-on-cash return answers "what did my money earn this year?" — it's the first-year cash flow divided by the cash you put in. It's the fastest way to compare deals, but it ignores appreciation and loan paydown.
Total ROI and IRR answer "what did the whole investment earn?" over your entire hold, including the sale. IRR is the most complete single number because it accounts for the timing of every dollar. Watch how it moves when you change the appreciation rate or hold period — that sensitivity is the point.
The three ways to measure return
"ROI" isn't one number — it's a family of them, each answering a slightly different question. This calculator reports all three so you're never relying on a single lens.
Cash-on-cash return
year-1 cash flow ÷ cash investedYour first-year cash return on the actual money you put in — down payment, closing costs, and upfront repairs. The fastest way to compare deals, but it stops at year one and ignores appreciation and loan paydown.
Total ROI
total profit ÷ cash investedEvery dollar of profit over your whole hold — cash flow plus appreciation and loan paydown, minus buying and selling costs — as a percent of what you invested. It captures the full result but not the timing of the dollars.
Annualized IRR
time-weighted annual rateThe most complete single number: it blends the initial investment, every year's cash flow, and the eventual sale into one annualized rate, accounting for when each dollar arrives. A dollar next year is worth more than a dollar in year ten, and IRR is the metric that knows it.
What's a good ROI on a rental property?
There's no official cutoff, but useful reference points exist. Many buy-and-hold investors look for a first-year cash-on-cash return of 8% or more, and a double-digit annualized IRR once appreciation and loan paydown are counted. For context, that IRR range is often compared against what the same money might earn in index funds — real estate's edge comes from leverage, control, and tax treatment, not from any single headline rate.
What counts as "good" also depends on strategy. A cash-flow investor in an affordable market may accept lower appreciation for a high current return; an investor in a growth market may accept thin early cash flow betting on appreciation and rising rents. The right target is the one that beats your alternatives at a risk level you can live with.
Where ROI quietly gets overstated
Rosy ROI numbers usually come from a few predictable places. Watch for these before you trust a projection — yours or a seller's:
- Optimistic appreciation — A percentage point of assumed growth can swing a 5-year return dramatically. Test the deal at zero appreciation to see if it stands on income alone.
- Missing reserves — Leaving out vacancy, maintenance, and CapEx makes early cash flow — and therefore cash-on-cash — look far better than reality.
- Ignoring selling costs — Agent commissions and closing costs at sale can consume 7–8% of the price. A return that skips them overstates your actual profit.
- Forgetting purchase costs — Closing costs and upfront repairs are real invested capital. Counting only the down payment inflates every ratio.
This calculator includes all of these by default, which is why its return may look lower than a back-of-the-napkin estimate — and closer to what you'll actually experience.
Frequently asked questions
What is a good ROI on a rental property?
There is no single number, but many buy-and-hold investors target an 8%+ first-year cash-on-cash return and a double-digit annualized IRR once appreciation and loan paydown are included. A 'good' ROI depends on your market, risk tolerance, and whether you're buying for income or growth. This calculator lets you compare a property against your own target.
What's the difference between ROI, cash-on-cash, and cap rate?
Cap rate measures the property's unleveraged yield (NOI ÷ price), ignoring your loan. Cash-on-cash is your first-year cash return on the actual money you invested. Total ROI (and IRR) capture the full picture over your whole hold — cash flow plus appreciation and loan paydown, minus costs. They answer different questions, so it helps to look at all three.
What is a good IRR for a rental property?
IRR blends every cash flow and the eventual sale into a single annualized rate. Many residential investors consider low-to-mid teens attractive for a leveraged single-family rental, though it's very sensitive to your appreciation and hold-period assumptions. Treat it as a comparison tool, not a promise.
Does this ROI include appreciation and loan paydown?
Yes. The total return and IRR include your monthly cash flow, the equity your tenants build by paying down the loan, and property appreciation over your hold — minus buying and selling costs. You can turn appreciation down to zero to see the return on income alone.
How does leverage affect ROI?
Borrowing to buy magnifies your return, up or down. Because you control the whole property with only your down payment, appreciation and loan paydown are calculated on the full value but earned on a fraction of the cash — which lifts your return when things go well. The same leverage cuts the other way if values fall or the property runs at a loss, so it raises both reward and risk.
Should I include appreciation in my ROI?
Include it, but conservatively. Appreciation is often the largest single component of long-term return, yet it's also the least certain — nobody can promise a growth rate. A good habit is to run the analysis twice: once with a modest appreciation assumption and once at zero, so you know whether the deal stands on cash flow alone or depends on the market cooperating.
Is the projected return guaranteed?
No. Returns depend on assumptions — rent, vacancy, appreciation, and how long you hold — that no calculator can guarantee. Use conservative numbers, and treat the output as an educational estimate rather than a forecast.