Underwrite
Rental property ROI calculator
People say "ROI" when they mean three different things. This page computes a plain return-on-investment from annual operating profit (or cash flow) against the cash you put in - and labels what you entered so you don't mix it with cap rate or CoC by accident.
Assumptions
Returns stack
- Annual profit (cash flow)
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- ROI
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When to use
Partner asks for "ROI," not jargon; comparing a light-rehab hold to a fat-down deal; sanity-checking a blog that quotes ROI without a formula.
When not to
Don't use simple ROI for a multi-year hold with appreciation baked in - this page skips IRR and exit math. And don't quote a number without saying whether profit is NOI or cash flow.
Assumptions: Default profit is pre-tax cash flow (NOI minus debt service). Appreciation, principal paydown, and income tax are not included unless you fold them into profit yourself.
Worked examples
Input
Cash flow $9,000/yr Cash in $75,000
Output
ROI 12.0%
Leveraged deal - return on equity, not on full price.
Input
All-cash $375,000 NOI $22,500
Output
ROI 6.0%
Same property, no loan - ROI lands near cap rate when profit equals NOI.
Common traps
- ROI without a definition is marketing - always say cash flow vs NOI.
- Appreciation and principal paydown are not in this simple ROI.
- Year-one ROI is not lifetime IRR.