How to Calculate ROI on a Rental Property
A Practical Guide for Investors
If you're evaluating a rental — current or potential — these are the numbers that actually matter.
Key ROI Metrics
Cash Flow
Monthly income minus monthly expenses. The simplest measure of whether a property is paying for itself.
Cap Rate
Net operating income divided by property value. Used to compare properties on a yield basis.
Cash-on-Cash Return
Annual cash flow divided by cash invested. The most accurate measure of your actual return as a leveraged investor.
Total Return
Cash flow + appreciation + principal paydown + tax benefits. The full picture of long-term returns.
Expenses Most Owners Underestimate
- Vacancy (typically 5 to 10%)
- Maintenance and repairs (1 to 2% of property value annually)
- Capital expenditures (roof, HVAC, etc.)
- Property management (if applicable)
- Insurance, taxes, HOA dues
- Turnover costs
How to Improve ROI
- Reduce vacancy with better leasing
- Improve tenant retention to lower turnover
- Optimize pricing to current market
- Lower maintenance costs through preventative care
- Refinance or restructure debt when rates are favorable
Try Our ROI Calculator
Plug in your property details and see your actual return on investment.