Rental Property ROI Calculator
Measure a rental's annual return relative to its purchase price.
Results update as you type.
This calculator is for illustrative purposes only. Actual rates, fees and terms vary by lender. Consult a qualified financial adviser before making borrowing decisions.
How it works
Return on investment, or ROI, is the plain-language way most people judge whether a rental property is worth owning. A rental property ROI calculator subtracts the annual expenses from the annual rental income to find the yearly cash flow, then divides that by the purchase price to express the return as a percentage. In one figure it tells you how hard the property's price is working to generate income. The measure is popular because it is intuitive and easy to compare. A property returning eight percent on its price is producing more income per dollar than one returning four percent, all else equal. Framing the return against the full purchase price gives an unleveraged view, treating the property as if you paid all cash, which strips out the distortions of different financing arrangements and lets you compare deals on the asset's own merits. The calculation works because it ties recurring net income directly to the cost of acquiring the asset, the same logic behind a bond's yield. It does have limits: by using purchase price rather than the cash you actually put down, it does not capture the amplifying effect of a mortgage, and by looking at a single year it ignores appreciation and loan paydown. Even so, it is an excellent first-pass screen. Pair it with cash-on-cash return for the leveraged view and cap rate for market comparison, and you have a rounded picture of a rental's performance.
ROI = (annual income − annual expenses) ÷ purchase price × 100
Subtracting annual expenses from annual rental income gives the yearly cash flow the property produces, and dividing that by the purchase price expresses it as a percentage return on the full price paid. Because the denominator is the total price rather than only the cash invested, this measure reflects an unleveraged return, treating the property as if bought outright. It offers a simple, comparable gauge of how efficiently the asset converts its price into income.
Source:Standard real estate formula
We review all our tools from time to time to ensure accuracy.
Worked example
How to use this calculator
- 1
Enter your values
Enter annual rental income, annual expenses and purchase price.
- 2
Adjust the options
Fine-tune any options to match your situation.
- 3
Read your result
Return on investment updates instantly as you type — no button to press.
Frequently asked questions
How is this ROI different from cash-on-cash return?
This ROI divides annual cash flow by the full purchase price, giving an unleveraged return as if you bought with all cash. Cash-on-cash return instead divides by only the cash you actually invested, such as your down payment and closing costs, capturing the effect of a mortgage. ROI is best for comparing properties on their own merits, while cash-on-cash shows how leverage magnifies the return on your personal capital.
What expenses should I include?
Include the recurring annual costs of owning and operating the rental: property taxes, insurance, maintenance and repairs, property management fees, and any utilities or HOA dues you cover, plus a realistic allowance for vacancy. If you want an unleveraged operating return, leave out mortgage payments, since including them turns this into a cash flow after financing. Keeping the expense list consistent lets you compare properties fairly.
What counts as a good rental ROI?
There is no universal target, but many investors look for something in the mid-single digits or higher on an unleveraged basis, judging it against alternatives like stocks, bonds, or other properties. A higher ROI is more attractive but may reflect greater risk, a weaker location, or deferred maintenance. Because markets differ, compare a property's ROI against similar rentals in the same area rather than a fixed nationwide benchmark.
Does this include appreciation?
No. This calculator measures only the annual income return relative to price, ignoring any increase in the property's value over time. Appreciation can be a large part of real estate's total return, but it is uncertain and market-dependent, so keeping it separate makes the income return cleaner and more comparable. To estimate value growth, use a home appreciation calculator alongside this one for a fuller picture of total return.
Should I use purchase price or current value?
For evaluating a potential purchase, use the price you would pay, since that is the capital being committed. For reviewing a property you already own, some investors instead divide by its current value to see the return on the equity tied up today, which may have grown. Both are valid but answer different questions, so be consistent about which basis you use when comparing multiple properties.