Rental Total Return (Four Components)
Total = cash flow + principal paydown + appreciation + depreciation tax shield.
Example
You enter
- Cash invested ($) 50000
- Annual cash flow ($) 3000
- First-year principal paydown ($) 2500
- First-year appreciation ($) 7500
- Depreciation tax savings ($) 1500
You get
- Total first-year return 14500
- Total (%) 29
Checked against published worked examples from: Denver Investment Real Estate (Chris Lopez).
Details, formula, and sources
ScopeEach as a percent of cash invested. $50K cash with $3K/$2.5K/$7.5K/$1.5K -> $14,500 (29%) vs the 6% cash-on-cash alone; a flat market still returns 14% from cash flow, paydown and the tax shield. A screening aid.
Formula or tabletotal = cash_flow + principal_paydown + appreciation + tax_savings; each component % = component / cash x 100; total % = total / cash x 100 (all returned as percents).
Source and editionThe four-component rental total return (cash flow, paydown, appreciation, tax shield) used by real-estate investors, by name.
Free accessThe four-component total return of a rental is a widely-published real-estate-investing framework.
What governsEstimate. AHJ and licensed professional govern.
API field namescash_invested_usd, annual_cash_flow_usd, principal_paydown_usd, appreciation_usd, tax_savings_usd, total_usd, total_pct
- Four components cash flow + principal paydown + appreciation + tax savingsreal-estate-investing
- As percent of cash each and the total divided by cash investedreal-estate-investing
- Projections appreciation is projected; tax savings depend on the taxpayerscope of this tile