Rental Property ROI Calculator 2025 – Cash Flow & Cap Rate

Introduction

Real estate investing can be a powerful wealth-building tool, but only if the numbers make sense. A Rental Property ROI Calculator helps investors evaluate the potential profitability of a property before making an offer.

In this guide, we'll break down the key metrics every landlord needs to know:

• Cash Flow: Money left over after expenses.
• Cap Rate: The property's natural rate of return.
• Cash-on-Cash Return: The return on your actual invested capital.

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Inputs

• Purchase Price: The cost of the property.
• Rental Income: Monthly rent expected.
• Operating Expenses: Property tax, insurance, maintenance, management fees.
• Financing: Down payment, interest rate, loan term.

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Key Metrics Explained

1. Cash Flow

Formula: Total Income - Total Expenses (including mortgage)

Positive cash flow means the property pays for itself and puts money in your pocket. In 2025, with interest rates stabilizing, investors are prioritizing cash flow over pure appreciation.

2. Cap Rate (Capitalization Rate)

Formula: Net Operating Income (NOI) / Purchase Price

Cap rate measures the property's efficiency, ignoring financing.

• 4-6%: Typical for stable, high-demand areas.
• 7-10%: Common in riskier or developing markets.

3. Cash-on-Cash Return

Formula: Annual Pre-Tax Cash Flow / Total Cash Invested

This is the "true" return on your money. If you put $50,000 down and make $5,000 in cash flow per year, your cash-on-cash return is 10%.

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2025 Real Estate Trends

• High Interest Rates: Investors are using larger down payments to ensure positive cash flow.
• Rent Growth: Rent increases have slowed in some markets, making accurate income projections critical.
• Short-Term vs. Long-Term: Many are converting Airbnbs back to long-term rentals due to regulation and saturation.

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Example Scenario

Property: Single-family home for $300,000

• Rent: $2,500/month
• Expenses: $800/month (tax, insurance, maintenance)
• Mortgage: $1,400/month

Analysis:

• Income: $30,000/year
• Expenses: $9,600/year
• NOI: $20,400
• Debt Service: $16,800/year
• Cash Flow: $3,600/year ($300/month)
• Cap Rate: 6.8%
• Cash-on-Cash (assuming $75k down): 4.8%

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FAQ

Q: What is the 1% Rule? A: A quick screening rule suggesting monthly rent should be at least 1% of the purchase price. In 2025's market, this is harder to find but still a good target for cash flow.

Q: Should I self-manage or hire a property manager? A: Management fees (typically 8-10% of rent) eat into profits but save time. Factor this into your calculator to see if the deal still works.

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Related Tools

• Mortgage Calculator: /calculator/04-mortgage-calculator
• Investment Return Calculator: /calculator/05-investment-return-calculator

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Conclusion

Never buy a rental property on "gut feeling." Use the Rental Property ROI Calculator to run the numbers objectively. A good deal is defined by the math, not the house.