How to Calculate ROI on Your Rental Property

By PropsManager Team | Dec 17, 2025

How to Calculate ROI on Your Rental Property

Revenue is vanity, profit is sanity. To know if your investment is performing, you need to calculate your Return on Investment (ROI).

1. Cash Flow

$$ \text{Income} - \text{Expenses} = \text{Cash Flow} $$

• Income: Rent, parking fees, laundry, etc.
• Expenses: Mortgage, taxes, insurance, maintenance, vacancy reserve, management fees.

2. Cash-on-Cash Return

This measures the return on the actual cash you invested (down payment + closing costs + rehab).

$$ \text{Cash-on-Cash ROI} = \frac{\text{Annual Pre-Tax Cash Flow}}{\text{Total Cash Invested}} \times 100 $$

Example: You invested $50k. You make $5k/year in positive cash flow. $$ \frac{5,000}{50,000} = 10% \text{ ROI} $$

3. Cap Rate (Capitalization Rate)

Used to compare properties regardless of financing.

$$ \text{Cap Rate} = \frac{\text{Net Operating Income (NOI)}}{\text{Current Market Value}} \times 100 $$

Note: NOI does not include mortgage payments.

Conclusion

Don't guess. Run the numbers. A property might look cash-positive but have a terrible ROI compared to other investments. Use these metrics to make data-driven decisions.