Rental Property ROI Calculator
Rental Property ROI Calculator
See your cash-on-cash return, cap rate and five-year wealth build on a rental property, with professional management built in.
Statement · Pre-tax basis
Red Roof Rentals · 253.222.3387
Growth assumptions & projection
| Cap RateNet operating income ÷ purchase price | 0% |
| Total ROI, Year 1Cash flow + principal paydown + appreciation | 0% |
| Total Cash InvestedDown payment + closing + improvements | $0 |
| Annual Net Operating IncomeBefore financing | $0 |
| Mortgage Payment (P&I)Monthly, amortized | $0 |
| Annual Cash FlowAfter all expenses and financing | $0 |
| Line Item | Basis | Monthly |
|---|---|---|
| Net Cash Flow | $0 | |
| Year | Cash Flow | Cum. CF | Value | Balance | Equity | Cum. ROI |
|---|
Cumulative ROI = (cumulative cash flow + equity gain) ÷ initial cash invested. Pre-tax; depreciation and tax benefits are not modeled. For planning only, not financial, tax or legal advice. Confirm specifics with a CPA. Red Roof Rentals management starts at 8% with four written guarantees; your rental analysis confirms the rent and fees for your property.
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See cap rate, total ROI, the monthly operating statement and a year-by-year wealth-build projection.
How Rental Property ROI and Cap Rate Are Calculated
The calculator above runs the same math a lender, appraiser or experienced investor would use. Here is what each number means, so you can trust what you see and compare one Tacoma rental property against another.
Net operating income (NOI)
Net operating income is the rent you actually collect after vacancy, minus the costs of running the home: property taxes, insurance, HOA dues, a maintenance reserve and the property management fee. Your mortgage is not part of NOI.
NOI = (Monthly rent × (1 − vacancy rate)) − operating expenses
Cap rate
Cap rate shows how hard the property works on its own, as if you paid cash. Because it ignores financing, it is the best way to compare two homes side by side.
Cap rate = Annual NOI ÷ Purchase price
Cash-on-cash return
Cash-on-cash return answers a simple question: what is my yearly cash flow compared to the money I put in? Cash flow is NOI minus your mortgage payment. Cash invested is your down payment, closing costs and any upfront repairs.
Cash-on-cash return = Annual cash flow ÷ Total cash invested
Total ROI
Cash flow is only one way a rental builds wealth. Total ROI also counts the loan principal your tenant helps pay down and the value the home gains each year. That is why a property with thin monthly cash flow can still be a strong long-term investment.
Total ROI (year 1) = (Cash flow + Principal paid down + Appreciation) ÷ Cash invested
Worked Example: A Tacoma Single-Family Rental
This example uses the calculator's starting numbers, so you can click Reset to defaults and follow along. Picture a modest three-bedroom home in Tacoma bought for $350,000 with 25% down and a 30-year loan at 6.5%.
| Down payment (25%) | $87,500 |
| Closing costs + initial repairs | $12,000 |
| Total cash invested | $99,500 |
| Monthly rent | $2,700 |
| Rent collected after 5% vacancy | $2,565 |
| Taxes and insurance ($5,000 a year) | −$417 |
| Maintenance reserve (8% of rent) | −$216 |
| Management fee (8% of rent) | −$216 |
| Monthly NOI | $1,716 |
| Mortgage principal and interest | −$1,659 |
| Monthly cash flow | $57 |
Cap rate: $20,596 annual NOI ÷ $350,000 = 5.9%.
Cash-on-cash return: $686 a year in cash flow ÷ $99,500 invested = 0.7%.
Total ROI in year one: add about $2,934 of principal paydown and $14,000 of appreciation (at 4%), and the return climbs to roughly 17.7%.
The lesson is clear. In the Tacoma market, most of your return comes from equity, not monthly cash flow, so protecting the rent check matters a lot. In this example, one empty month costs about $2,700, which wipes out almost four years of cash flow. Strong tenant screening, fast leasing and good renewals keep that from happening. See what downtime really costs with our vacancy calculator.
Rental Property ROI FAQ
What is a good cap rate for a Tacoma rental?
Puget Sound home prices are high compared to rents, so cap rates here tend to run lower than the national average. Many single-family rentals land somewhere in the 4% to 6% range. A lower cap rate is not a deal breaker if the home is in a strong location with good appreciation potential.
Is cap rate the same as ROI?
No. Cap rate measures the property alone and leaves out your loan. ROI measures your return on the cash you invested, so it changes with your down payment, interest rate and loan term.
Why does the calculator include a management fee?
Even if you manage the home yourself, your time has value, and lenders and buyers often budget for management when they value a rental. A professional manager also handles screening, rent collection, maintenance and Tacoma and Washington rental rules. Compare your options with our fee calculator or read about property management cost in Tacoma.
Should the mortgage be included in cap rate?
No. Cap rate uses NOI, which is figured before any loan payment. Your mortgage shows up in cash flow and cash-on-cash return instead.
How accurate are these results?
The calculator gives a pre-tax estimate based on the numbers you enter. It does not include depreciation, income taxes or major one-time repairs, so talk with your CPA before you buy. The most important input is rent, and a free rental analysis from our team will give you a real number for your home.
Can Red Roof Rentals help me improve my returns?
Yes. Red Roof Rentals has managed Tacoma and Pierce County rentals since 2009 and is a NARPM® affiliate member. We focus on the things that move ROI the most: pricing rent right, cutting vacancy and keeping good tenants longer. Book a consultation or call 253.222.3387.