Property ROI calculator
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The formula, a worked example, and the specific way this measure gets misquoted.
How it works
Total return on a property comes from four places at once: the cash it throws off, the mortgage being paid down, the price rising, and what the sale costs you at the end.
The formula
profit = cumulative cash flow + net sale proceeds - cash invested
- Set the holding period and your growth assumptions.
- Read the waterfall to see which source contributes what.
- Use the annualised figure, not the total, to compare with other investments.
Worked example
| Item | Value |
|---|---|
| Cash in | $88,500.00 |
| Cumulative cash flow | -$16,804.00 |
| Mortgage paid down | $55,899.41 |
| Price growth | $103,174.91 |
| Total profit | $120,706.82 |
| Total ROI | 136.39% |
| Annualised return | 8.98% |
The mistake to avoid
Dividing the total return by the number of years. Returns compound: doubling your money over ten years is 7.2% a year, not 10%. Dividing overstates every multi-year result, and the error grows with the holding period — exactly when people quote it.
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What is the difference between rental yield and cap rate?
Cap rate is net operating income divided by the property's value, and it deliberately ignores financing. Net yield divides the same income by what you actually spent to acquire the property, including stamp duty and fees. Cap rate compares buildings; net yield compares your deals. Neither accounts for the mortgage — that is cash-on-cash return.
Should buying costs be included in rental yield?
For net yield, yes. Stamp duty, legal fees and renovation are money you spent to own the asset, so measuring income against price alone flatters the result — by a full percentage point in markets with high transfer taxes. This calculator shows gross on price and gross on total side by side so the gap is visible rather than assumed.