Rental Property ROI Calculator Formula
Understand the math behind the rental property roi calculator. Each variable explained with a worked example.
Formulas Used
Total Annual ROI
total_roi = (total_annual_return / total_cash_invested) * 100Total Annual Return
total_return = total_annual_returnCash-on-Cash Return
coc_return = (annual_cash_flow / total_cash_invested) * 100Variables
| Variable | Description | Default |
|---|---|---|
total_cash_invested | Total Cash Invested(USD) | 80000 |
annual_cash_flow | Annual Cash Flow(USD) | 6000 |
annual_principal_paydown | Annual Principal Paydown(USD) | 4500 |
annual_appreciation | Annual Appreciation(USD) | 12000 |
annual_tax_benefit | Annual Tax Benefit(USD) | 3000 |
total_annual_return | Derived value= annual_cash_flow + annual_principal_paydown + annual_appreciation + annual_tax_benefit | calculated |
How It Works
Total Return on Rental Property
Rental property ROI captures all four wealth-building components of real estate investing.
Formula
Total ROI = (Cash Flow + Paydown + Appreciation + Tax Benefit) / Cash Invested x 100
Four Pillars of Return
1. Cash Flow: Net income after all expenses and debt service 2. Principal Paydown: Equity gained as tenants pay down your mortgage 3. Appreciation: Property value increase over time 4. Tax Benefits: Depreciation and deduction savings
Worked Example
$80,000 invested with $6,000 cash flow, $4,500 paydown, $12,000 appreciation, $3,000 tax benefit annually.
total_cash_invested = 80000annual_cash_flow = 6000annual_principal_paydown = 4500annual_appreciation = 12000annual_tax_benefit = 3000
- 01Total annual return: $6,000 + $4,500 + $12,000 + $3,000 = $25,500
- 02Total ROI: $25,500 / $80,000 x 100 = 31.9%
- 03Cash-on-cash return: $6,000 / $80,000 x 100 = 7.5%
- 04The total ROI of 31.9% shows the power of combining all return components
Ready to run the numbers?
Open Rental Property ROI Calculator