Calculating Returns On a Rental Property (ROI with Excel Template)

Dive into real estate investment analysis using Excel! Learn to calculate cash-on-cash return and ROI to evaluate potential property investments effectively.

🔍 What You'll Learn:
▪️ ROI & Cash Flow Calculation: Master the art of determining returns and monthly cash flow using Excel.
▪️ Template for Investment Analysis: Discover how to use a simple Excel template for analyzing various investments.
▪️ Financing & Expenses Consideration: Understand how to factor in financing, rehab costs, and other expenses.

🛠️ Highlights:
▪️ Real-life example: Evaluate a $200K property with a potential $1,400 monthly rent.
▪️ Practical tips for realistic and conservative financial planning.
▪️ Splitting loan payments into interest and principal for accurate ROI.

In a first step we'll calculate the Cash-On-Cash Return. This is the ratio (expressed as a percentage) of annual before-tax Cash Flow divided by the equity or own money invested in the property. This figure is useful when consistent monthly cash flows are the most important consideration for the investment. But because it's based on cash flows it considers the full debt service. So, both the interest and the principal pay down are deducted from the rental revenue. But most investors do not consider the principal payment as an expense. Because by reducing the outstanding principal balance we create equity.

Therefore, we'll also calculate the Return on Investment or RoI of the property. For this we'll exclude the principal pay down from the expenses. To do that we'll use the Excel formulas CUMIPMT and CUMPRINC to split the monthly annuity. The resulting cash flow we divide again by the equity invested in the property.

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#excel

[drsteele]

Nice and clear - well done Leila! Quick hint: to duplicate a formula in a cell below, instead of copying and pasting from edit mode at 12:49, just press CTRL' (that's control and apostrophe) in D51 and there it'll be! Second hint: don't rent properties to college kids unless you drastically increase maintenance expenses.

[Saddam-Abdulameer]

I watched this video more than 5 times, its valuable, thank you liela

[genesisfortune]

Amazing video. I have seen many videos from you before about other topics related to Microsoft. Little I knew that your expertise also covered the investment field. Please don't stop teaching other like myself. Congratulations.

[tubemayoor]

Hey, this is fantastic. I like how you deliver the content and the explanation you provide is superb! You teach how to fish, instead of giving the fish itself! Keep it up!

[TTex]

Leila is killing it with her channel. Doesn't hurt that she's gorgeous and has the cutest accent.

[nikhil]

Very informative
I would like to see more accounting videos in future especially accruals, financial statements etc in detail .
Thanks 😊

[joshuaalfred]

I've been trying to do this myself and was getting lost in the weeds. My spreadsheet was becoming more and more complicated! Mega thanks for this simple spreadsheet :) subscribed

[NamanArya]

I eagerly wait for your videos Leila. I guess no one explains such fancy excel workarounds like you do. Kudos!

[karhukivi]

Hi Leila! I've paused the video at 0:50 to give you my back-of-the-envelope calculation. I'm assuming a perpetuity rate of 5% which I know is entirely crazy, but it gives a ballpark result. Annual rental income of (1400x12) $16, 800 / 0.05 = $336, 000 which is more than 50% over the purchase price. So I am concluding it is a good investment. Now I'm going to watch the rest of your video.

[amiitmish]

Lovely, never calculated in this way, hats off to u

[aaleyr]

glad to see you are so pro in Excel . i mean your really enjoy it ...and it makes learning fun for us . 👍

[Robert]

Cool worksheet! Let's make a super version that includes looking at this over a longer period of time: You have property increases, tax increases, rent increases, potentially property refurbishments, fencing, roofing, water heaters, hvac systems, plumbing or electrical for cost but I think there is also the added benefit of tax deductions.

[nickt]

Nice job young lady. Very informative and nicely presented.

[yordennowe]

Thank you Leila, very helpful.

Would you (or someone else) have an idea on how to correctly reflect your potential property value increase (based on historic returns) into the ROI Return?

Cheers,

[makisalimhussain]

Wonderful Leila, by this you explained in a simple manner how to evaluate wide range of business opportunities.
Many thank
Maki S. Hussain
Baghdad - Iraq

[graysonbarrett]

Thank you so much for this video. It is a huge help to me and you explain how to use it very well.

[omarkhattab]

A great teacher and expert .. I like all of your videos ...

[kaziahmed]

worth watching, very easy to follow. best wishes.

[MattDoesGamess]

This was great to see as a finance graduate. I had no idea about an excel function that can separate principal and interest. That function should be widely known for everyone. Also the illustration showing that as you pay off the principal your ownership grows with the house. Really great watch, I'll be enrolling in your VBA udemy course very soon too! So thanks for everything you do.

[gabriellaprievara]

Thank you Leila! Very, very helpful and so easy to understand. I saved the template and I will definitely use it. :)