Faro Labs / Tools / Rental ROI calculator
Rental ROI calculator
A rental earns four ways at once. Total ROI adds them up, cash flow, loan paydown, and appreciation, against the cash you put in, so you see the whole first-year return, not just the part that hits your bank account.
Of the 16.5% total return, 1.6% is cash in your pocket and the rest is equity: $3,624 of loan paydown and $12,750 of appreciation. Real, but not liquid until you sell or refinance.
Want the cash-only return? Use the cash-on-cash calculator.
How total ROI is built
ROI = total return ÷ cash invested
Leverage is what makes a rental's total return larger than its cash yield. You control the whole property but invested only the down payment, so appreciation compounds on the full value while your tenant retires the loan on your behalf. Add the cash flow on top and the return has three engines, not one. The catch is that two of the three build equity you can't spend until you sell or refinance, which is why cash flow and paydown, the reliable parts, deserve more weight than appreciation, the hopeful part.
ROI questions
What counts as return on a rental property?
Four things: cash flow, loan paydown, appreciation, and any tax benefit. Cash-on-cash captures only the first. Total ROI adds the equity you build through paydown and appreciation, which on a leveraged rental is often the larger part of the return.
ROI vs. cash-on-cash return: what's the difference?
Cash-on-cash is the cash return alone: money in your pocket over cash invested. Total ROI also credits the equity you gain from principal paydown and appreciation, even though it isn't liquid until you sell or refinance. Both matter; this tool shows them side by side.
Why separate paydown and appreciation from cash flow?
Because they behave differently. Cash flow is money you can spend now; paydown is reliable but locked in equity; appreciation is real but uncertain. A sound analysis leans on the first two and treats appreciation as upside rather than the plan.
Every calculator
Every source of return, from one paste.
Faro breaks a deal's return into cash flow, paydown, and appreciation automatically, with the comps behind it.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.