Rental Property ROI Calculator

Return on Rental Property Investment Calculator

Table 1 – Cash Flows & ROI Details

Table 2 – Yearly Financial Projections Details

Table 3 – ROI Table Details

Table 4 – Year Ending Balances Details

Step 1 – Purchase Assumptions

Step 2 – Income Assumptions

Step 3 – Operating Cost Assumptions

Step 4 – Property Sales Assumptions

Step 5 – Taxes, Inflation, & Return Assumptions

Expected Rate of Return & Cash Flow Summary

Sample Material Disclaimer

Use the Income Property Analyzer to find the best investment properties

Property Address:

The Investment Property Analyzer will take the complex work out of evaluating the return on investment for any residential property investment. Just input a few numbers such as acquisition costs, rental income, interest rate, property and tax rate of any investment property and get back the expected 5 year return on your cash invested. Use this tool to evaluate potential investment property options. This calculator is easy to use but can also be fine-tuned using option inputs to match your specific situation or any local variations.

Complete the green boxes and this calculator will instantly display the ROI, cash flow, and IRR for this investment property. Adjust any of the required or optional inputs and the results will instantly update to reflect the changes.

Note: Assumptions are hidden by default. Expand the assumptions line to change the assumptions.

Required Inputs

Optional Inputs

Home Value

Price paid including capital improvements

Initial investment

% down = $

Debt

Interest rate

% interest rate of mortgage

Assumptions (optional inputs)

Loan Term		typical loan term (months, if no debt use term of 1)
Buying costs		% of sales price

Monthly Rent

Gross monthly rental income Find estimated rental rates here

Cap Rate

Assumptions (optional inputs)

Vacancy rate		% of annual term rental
Rent Increases		% of monthly rent

Property Improvements

initial expenditures to get home ready for rental

Assumptions (optional inputs)

Property mgt		% of monthly rent
Maintenance		% of property value
Insurance cost		% of property value
Move-in Move out costs	$	per change in vacancy (tenant placement fees, make ready, etc)

Sales Price

Assumptions (optional inputs)

Selling Commissions		% of sales price = $
Annual Appreciation		% yearly rate of price appreciation

Land value

% of purchase price = $

Tax basis

Property tax

% of property value Find estimated property tax rates here

Assumptions (optional inputs)

Tax Rate		% ordinary income tax rate for investor/owner
Capital Gains tax		%
Cost inflation rate		% applied to maintenance,turnover & insurance costs
Investment Hurdle rate		% annual rate, for comparison to other investments

Return on Cash Invested

Projected 5 year IRR

Internal Rate of Return (IRR): IRR calculations are commonly used to evaluate the desirability of investments or projects. The higher a project’s IRR, the more desirable it is to undertake the project. Assuming all projects require the same amount of up-front investment, the project with the highest IRR would be considered the best and undertaken first.

http://en.wikipedia.org/wiki/Internal_rate_of_return

	Initial	Year 1	Year 2	Year 3	Year 4	Year 5	Net Total
Projected Cash Flow

Cash Flow Details	Initial	Year 1	Year 2	Year 3	Year 4	Year 5	Total

Purchase Investment
Net Cash Flow (see Table 2)
Sales Price
Selling costs
Taxable Gain See the following Sales Transaction Details for calculations.
Taxes
Note Payoff (see Table 4)

Total Annual Cash Flow

		Year 1	Year 2	Year 3	Year 4	Year 5	Total

ROI Details – Net cash flow

Present Value – Cash flows discounted by hurdle rate

Walk Away Price – Breakeven price between renting and selling

Sales Transaction Details						Year 5	Total

Sales Price
Selling costs

Cash Proceeds (before taxes and note repayment)
Depreciated Basis
Taxable Gain
Depreciation Recapture Tax Depreciation Recapture is when real property is sold at a gain and depreciation had been claimed, the owner is required to pay a tax at ordinary rates to the extent of the depreciation on residential real estate.
Capital Gains Tax
Note Payoff (see Table 4)

Cash from Sale (proceeds less taxes and less debt)

Financial Projections	Year 1	Year 2	Year 3	Year 4	Year 5	Total

Rent Income

Rental Expenses
Interest
Taxes
Insurance
Tenant Turnover costs Tenant Turnover Costs reflects estimated costs when a home is vacant and is re-rented. It reflects make-ready costs, leasing commissions, and advertising (if self-managed). Lower vacancy rates and longer term leases reduce these expenses. The U.S. average is 8%.
Maintenance
Buying cost
Professional Management
Total Rental Expense
Net Income1
Depreciation
Taxable income
Tax (benefit) cost2
Principal Reduction3
Capital expenditures4

Net Cash Flow (1-2-3-4)

	Year 1	Year 2	Year 3	Year 4	Year 5
Initial Investment
Yearly Price Appreciation
Appreciation Net of Taxes
Net Cash Flow
Net Worth Increase
ROI (net worth/initial investment)

Ending Year Balances

Debt Calculations

Beg. Balance

Year 1

Year 2

Year 3

Year 4

Year 5

Loan Balance

Principal Reduction

Mortgage Payments

Provided by Morris Green Properties for demonstration purposes only without warranty of any kind, express, implied or statutory. Examples, if any, are based on limited and dated information and may not be relied upon for accuracy or any other purpose other than illustrative of possible results.

Aaron Mottaghi

Broker / Owner

Morris Green Properties

www.morrisgreenproperties.com

512-461-6566