What is rental ROI?
Rental ROI estimates annual return from a rental property compared with the amount of cash invested.
Formula
Rental ROI = Annual Return / Cash Invested * 100
Rental ROI example
If annual cash flow, principal paydown, and appreciation total $17,800 on $80,000 of cash invested, estimated rental ROI is 22.25%.
How It Works
- Annual cash flow measures cash left after income, expenses, and debt service.
- Principal paydown and appreciation can be included when estimating total annual return.
- Cash invested usually includes down payment, closing costs, initial repairs, and other acquisition cash.
Why It Is Important
- ROI helps compare how efficiently invested cash is working.
- Cash-on-cash return and total ROI can tell different stories, especially with debt and appreciation.
- Reliable rental payment tracking and expense tracking make ROI estimates more trustworthy.
Important Limits
This calculator is for planning and education. It does not replace accounting, tax, lending, legal, appraisal, or investment advice. Actual performance depends on rent collection, lease terms, repairs, vacancy, financing, taxes, insurance, local market conditions, and the quality of your source records.