FREE ROI Tool – Effortlessly Calculate Rental Property ROI

Posted Wednesday, April 3rd, 2024
Real Estate Investment Podcast - 5 O'Clock Somewhere
Real Estate Investment Podcast - 5 O'Clock Somewhere
FREE ROI Tool - Effortlessly Calculate Rental Property ROI

FREE ROI Tool – Effortlessly Calculate Rental Property ROI, sidestepping mortgages to spotlight pure cash-on-cash returns for smarter property investments. Become a savvy real estate investor using our ROI spreadsheet that has been designed by seasoned pros Glenn Greene and Brett Bernard. This spreadsheet gives you a simple path to mastering cash-on-cash returns, effortlessly guiding you past the usual hurdles of mortgage and interest considerations. Using this ROI calculator, Brett provides a step-by-step explanation equipping you to make informed, financially sound decisions, propelling your real estate portfolio to new heights of success.

0:00:40 – All right, so we’re going to add to our website a link for a ROI calculation spreadsheet that Glenn and I put together back when we first started, and it’s something that we used to use a lot. I haven’t used it in a while. I just happened to find it. So today, we’re going to talk about ROI, return on investment, based on a cash-on-cash investment, and we’ll talk about why it’s a cash on cash investment and why you don’t talk about your mortgage and interest rates and all that into that scenario. So in this episode, that’s exactly what we’re going to do. We’re going to talk about return on investment with your rental property.

0:03:58 – We are sponsored by Title Assurance and Escrow, a title company here in Cordova that does all of our closings, title work, escrows, and we only use Title Assurance and Escrow. That relationship is very important because we can get things done for our investors quickly and easily. So to speak with Title Assurance and Escrow, call 901-737-3332 and ask for Chris or April.

0:01:52 – So on our website, whenever our producer gets around to it, because we know he’s a busy man, he doesn’t have a lot of time to do menial tasks like this, he’s going to put a link to a spreadsheet that Glenn put it together and I, between the two of us, we kind of expanded it and worked on it and tweaked it a little bit. There’s just a spreadsheet. You go in there and it’s pretty simple. So whenever you’re evaluating a property, the first thing you want to know is what kind of return are you going to get on this property, right? And you hear the rule, 1% rule, which is 12% gross annually before expenses, 10% gross. There’s all different terms that people use to determine what their return is and how to figure that. Every investor does it differently. But there’s a basic formula you need to use and this spreadsheet will help you use that. So if you go to our website at, somewhere on that website, there will be a link for you to click. And you can click on it. It’s going to pull up a spreadsheet. And what you do is you simply go in there and put in your purchase price, put in your estimated amount of repairs, put in your rent, either estimated rent or what the current rent is, or you can put in what the market rent is so you kind of know where you’re going to end up. Talk to your insurance agent, figure out what your insurance is going to run, and your taxes per year, which any agent worth their salt can look your taxes up for you in two minutes. It’s going to tell you your annual property taxes are X. Fill in those spots. And this spreadsheet then calculates your monthly taxes, monthly insurance, you can put aside a vacancy rate if you want. So if you figured, you know, the house is going to sit vacant for two months, when you go to rent, turn it, you can pop in a certain amount there. You can put in your monthly reserve for repairs. This specific sheet, I put $100, $200 a year. Some people put more, some people put less. HOA, which if you’re buying a rental house that has an HOA, I’m going to call you a moron. I don’t know why you’d buy a house that expensive in an HOA, but some people do. And then your property management fee. I put in 9% on this one just because that’s the average. It goes between 8% and 10% depending on the company. And then it totals your expenses, it deducts your rent, and gives you an overall cash on cash ROI. So let’s run through that list. First thing you do is you put your purchase price in, put in any estimated repairs, and you put in your rent because that’s part of the calculation, and then it’s going to give you your all-in costs. In this particular case, $105,000 purchase, you put $6,500 in repairs into the house, you’re all in at $111,500. Now what it’s going to do is take your rent, deduct all your expenses, come up with a net cash flow at the end of that scenario and divide it out and tell you what your net rate of return is. Now this net rate of return, which does not include mortgage payments, is 10.54%. Now obviously if you’re going to get a mortgage, that’s going to impact your monthly cash flow because you’re going to be paying a note. However, I get asked a lot, why don’t you put your mortgage payment into your cash on cash calculation? Let me repeat that and you tell me why. Why don’t you put your mortgage payment in your cash on cash calculation? Simple, because cash on cash is just that. Cash on cash, you don’t take out a mortgage. Now it doesn’t mean you can’t put a mortgage in place, but if you want to know what your return is, this is how you figure it out. In this case, you’re borrowing $95,000 from the bank. Well, guess what? You’re paying that money back to the bank. It’s not your money you’ve got invested. You’re taking the rent from the tenant and a portion of that you’re giving back to the bank, but they put the money up for you to begin with. So you can’t calculate that into your return because if you can go to the bank and borrow $100,000 and invest it, that’s fine. And if you can get the bank not to make you pay that back and you can take all that money and put it in your pocket, that’s a hell of a return. But that doesn’t work that way. You’ve got to make the payment back to the bank, so it’s a wash. Your interest payments are a deductible item, so you don’t put that in there because that’s not truly an expense. You have an expense, but you’re going to be able to write that off against your taxes, against your personal income. So you wouldn’t include that. So if you really want to know what your true return is, in this case, 10.54%, this sheet will tell you in a matter of minutes if it’s a good investment or not. Very simple. Any questions?

0:06:11 – Let’s talk about the vacancy spot per month. You’ve got zero in there at the moment. What kind of costs could I incur during a vacancy and what should a sensible estimate be for that?

0:06:24 – Well, depending on the management company, there are some management companies that charge a vacancy fee, right, of $25 a month. So if you’re with that particular company, then you may want to calculate the $25 a month vacancy fee isn’t that it’s going to generate full rent for you during the vacancy, but you put it aside because when you’re calculating your RRI, if you’re only calculating it out over nine months or eight months instead of a full 12 months, then you can add to, you want to adjust your numbers accordingly. I have zero in there because I’m going on the assumption that you’re buying a home with a 12-month tenant under a lease, that you’re not going to evict, you’re going to get full 12 months worth of cash flow. And on the basis of that, I’ll leave that at zero. But some investors want to do that. They want to put in 25 bucks a month for vacancy. They really like to pinpoint in on what their true ROI is. But if I could buy this house and have a 10.54% net return on investment, that’s outstanding. But here’s where people get tangled up. Well, yeah, but my payment is $700 a month. So that takes me down to $300 a month or $375 a month. I understand that. And this is where a lot of these young investors are screwing up. They look at that and be like, $300 a month, that’s not worth the hassle. Because you’re taking bank money and putting it into your investment, and then you’re taking income out of that investment and paying back the bank. Where is your money at in this scenario? Zero. You don’t have anything invested. It’s the bank’s money invested, so you cannot calculate your return based on the bank’s money. So please stop doing that. And if you do it the right way, then this investment strategy makes absolute sense and it works all day long. The problem we have is we have the U.S. and clowns as our previous guest Joffrey mentioned in California in one particular place, in Nevada he mentioned, where they’re preaching this scenario and giving false numbers to these people and trying to make them think you’re going to get rich buying rental real estate. No, you’re not. You can get asset wealth. You can retire early one day. You can be like Daniel Tabish and have a ton of income coming in and 40 properties paid for if you start early enough and you manage your projects right. So I’m going to put this sheet on our site and go on there free of charge. Click on it, use it, calculate it, download it to your own computer if you want to. I don’t care. But please try to make some common sense decisions when calling an agent here in Memphis when you want to invest and understand what your true investment is, what your true return is. Because you can’t call me and say, well it’s not worth it for 300 bucks a month. Okay, well then don’t invest. Go back to working at Taco Bell or whatever it is you used to do before. If you want to invest, this is reality. Unless you’ve got $100,000 to spend on a house, you need to borrow money from the bank. If you’re going to borrow money from the bank, calculate your rate of return properly.

0:09:21 – You know, if you look at this ROI calculation sheet and you get confused, then call Brett, call Nick, call Jeff, call Jerry, and we can explain it to you on the phone.

0:09:35 – 901-692-7401, give us a call. Well, you shouldn’t get confused because all you do is you put in your purchase price, you’ve gone, you’ve had somebody look at the house and they tell you it’s going to be about $6,000 in minor repairs, get it rent ready, so you put that in there. It should rent for 12, 15 months, you put that in there and then guess what the sheet does? It does all the hard work for you. It calculates everything out for you. So it’s pretty easy to do. We would love for you to go to our website,, hit us with a question. We’ll be glad to respond to you directly. If we use it on the podcast and use it as a topic of discussion, I promise you we won’t use your name unless you give us the authority to do so. But we would love to hear from you. Or you can give me a call directly. Give us a call directly at 901-692-7401.

TN Association of Realtors Logo
Realtor Logo
Memphis Area Association of Realtors