Real Estate ROI Calculator

Cash-on-cash return measures annual pre-tax cash flow as a percentage of your total cash invested (typically the down payment plus closing costs). A property generating $14,400 annually in net cash flow on a $60,000 down payment has a 24% cash-on-cash return. Most investors target 8-12% or higher.

Include mortgage payment (principal and interest), property taxes, homeowners insurance, property management fees (typically 8-10% of rent), maintenance and repairs (budget 1-2% of property value annually), vacancy allowance (5-10% of gross rent), HOA fees if applicable, and any utilities you cover as the landlord.

Real estate leverage means you control a large asset with a relatively small down payment. If a $300,000 property appreciates 3% ($9,000) and you put down $60,000, that appreciation alone represents a 15% return on your cash invested. Combined with rental income and mortgage paydown, leveraged real estate can significantly outperform the underlying appreciation rate.

Cap rate (net operating income divided by purchase price) varies by market and property type. Generally, 4-5% is common in expensive urban markets, 6-8% in suburban areas, and 8-12% in more affordable or higher-risk markets. A higher cap rate indicates higher potential return but may also carry more risk.