Your real return, all four parts.
Cash flow is only the start. See your total return once you add loan paydown and appreciation, then compare it as one annualized ROI you can hold up against stocks or any other deal.
The property
Is this a good deal?
Where the return comes from
Total return broken into its parts
Equity growth over the hold
Return scorecard
Year-by-year projection
Assumes rent and expenses grow with your rent-growth rate and the property appreciates each year. Cumulative return adds cash flow, principal paydown and appreciation gain.
| Year | Cash flow | Loan balance | Property value | Equity | Cumulative return |
|---|
Rental ROI, explained
Three Components of Rental Return
Cash flow (rent minus expenses). Principal paydown (each mortgage payment reduces loan balance, building equity). Appreciation (property value grows over time, historically 3-4% nationally).
Why Total ROI Beats Cash-on-Cash
Cash-on-cash measures only cash flow. Total ROI includes the equity built each year through paydown and appreciation. Real estate often has high total ROI despite modest cash flow.
Realistic Appreciation Assumptions
Historical US average: 3-4% annually. Some markets do 6-8%; others stagnate. Use 2-3% for conservative analysis. Future may differ from past, appreciation isn't guaranteed.
Tax Benefits Add More
Depreciation deduction effectively shelters cash flow from taxation. Mortgage interest deductible. 1031 exchange defers capital gains. These add 1-3% to effective return for high-bracket investors.
Common questions
Is appreciation real return?
It's paper return until you sell. Cash flow and principal paydown are tangible. Plan exit when modeling, appreciation only counts when realized.
Should I include depreciation tax benefit?
For complete picture, yes. Depreciation creates phantom losses that offset rental income on taxes. Adds ~1-2% to effective return for typical investors.
How do I find principal paydown amount?
Year 1 of an amortization schedule shows it. Roughly 10-25% of mortgage payment goes to principal early; grows over time.
Conservative appreciation rate?
2-3%. National average is 3-4% long-term but varies wildly by location. Use lower number for stress testing.
What about closing costs on sale?
Reduce expected appreciation by 6-8% of sale price for selling costs. This calculator doesn't auto-deduct that.
Estimates for planning only. Appreciation is a projection, not a promise, and only counts once you sell. Real returns depend on financing, local market conditions, actual expenses, vacancy, tenant quality and time in the market. Tax benefits vary by your situation. Verify every figure before you buy.