Rental Property Calculator
Calculate cap rate, cash-on-cash return and monthly cash flow for a rental property, including vacancy, maintenance and management costs.
How to use this calculator
- 1Enter the purchase price, financing terms and closing costs.
- 2Enter the rent you expect to collect and a realistic vacancy allowance — do not assume 100% occupancy.
- 3Fill in operating expenses. Maintenance and management are modelled as a percentage since they typically scale with the property and rent.
How the calculation works
NOI = Effective gross income − Operating expenses
Cap rate = NOI ÷ Purchase price
Cash-on-cash = Annual cash flow ÷ Cash invested- Effective gross income
- Rent collected after allowing for vacancy
- Operating expenses
- Tax, insurance, maintenance, management, HOA — never the mortgage
- Cash invested
- Down payment plus closing costs — what actually came out of your pocket
NOI deliberately excludes the mortgage — it measures the property's own performance, which is why cap rate lets you compare an all-cash deal against a heavily financed one on equal terms.
Cash-on-cash return, by contrast, is entirely about your financed position: the same property can show a very different cash-on-cash return depending on how much you put down.
Worked example
$250,000 property, 20% down, $2,000/month rent
- 1.Loan amount: $250,000 − 20% down ($50,000) = $200,000, at $1,264.14 a month.
- 2.Effective gross income: $24,000 rent − 5% vacancy ($1,200) = $22,800.
- 3.Operating expenses: $3,000 tax + $1,200 insurance + $1,920 maintenance (8% of rent) = $6,120.
- 4.NOI: $22,800 − $6,120 = $16,680, a cap rate of 6.67% on the $250,000 price.
- 5.Annual cash flow: $16,680 NOI − $15,169.68 mortgage (12 × $1,264.14) = $1,510.32.
- 6.Cash-on-cash: $1,510.32 ÷ $55,000 invested ($50,000 down + $5,000 closing) = 2.75%.
Result: 6.67% cap rate, 2.75% cash-on-cash return
What sets real estate apart as an investment
A rental property is unusual among common investments because it can generate a return in several ways at once: rent collected while you hold it, the potential for the property itself to appreciate, and — for a leveraged purchase — the fact that a mortgage lets you control an asset worth far more than the cash you put in. That leverage cuts both ways: it magnifies gains when a deal performs, but it magnifies losses just as readily when it does not.
It is also a tangible, actively managed asset rather than a passive holding. A share of stock requires no maintenance and no landlord decisions; a rental property requires both, which is part of why real estate investing rewards operational skill and diligence, not just picking the right property.
The numbers investors actually underwrite a deal on
Beyond "does the rent cover the mortgage," professional real estate investors lean on a small set of standardized metrics to compare properties on equal footing.
- Net operating income (NOI) — rent collected after vacancy, minus operating expenses — but before the mortgage. It measures how the property itself performs, independent of how any particular buyer chooses to finance it.
- Cap rate — NOI divided by purchase price, expressed as a percentage. Because it excludes financing entirely, it is the standard way to compare an all-cash deal against a heavily leveraged one, or two properties in different price brackets.
- Cash-on-cash return — annual cash flow after the mortgage, divided by the actual cash invested (down payment plus closing costs). Unlike cap rate, this one is all about your specific financed position.
- Debt service coverage ratio (DSCR) — NOI divided by the annual mortgage payments. Lenders use this to judge whether a property's own income comfortably covers its debt, and typically want a meaningful cushion above 1.0 before approving investment-property financing.
Costs that are easy to underestimate
First-time landlords tend to focus on the mortgage and forget everything around it. A handful of costs consistently surprise people running the numbers for the first time.
- Vacancy — no property rents 100% of the time — tenant turnover, market softness and the time needed to find a new renter all eat into the year's income, even in a strong rental market.
- Maintenance and capital reserves — routine repairs are a predictable ongoing cost, but big-ticket items — a roof, HVAC system, or water heater reaching the end of its life — need their own separate reserve, not just a maintenance line item.
- Turnover costs — cleaning, repainting, re-listing and lost rent between tenants add up, particularly on properties with shorter average tenancies.
- Insurance and property tax increases — both tend to rise over time, sometimes faster than rents in a given market, which compresses margins on deals underwritten with static assumptions.
What being a landlord actually involves
Owning a rental property is an operating business, not a passive line on a balance sheet. It means screening and selecting tenants, keeping the property compliant with local health, safety and landlord-tenant law, responding to repair requests, and — in the worst case — navigating an eviction process that can be slow, costly and jurisdiction-specific. Many investors hire a property manager to handle this in exchange for a percentage of collected rent, trading some return for time and distance from day-to-day operations.
The downside risks worth naming plainly
A rental property is illiquid — it cannot be sold in a day if money is suddenly needed, unlike a stock or bond. It also concentrates a large amount of capital in a single asset in a single location, so a local economic downturn, a change in a neighborhood, or a bad tenant can affect returns far more than a single position would in a diversified portfolio. And because most rental purchases are leveraged, a market downturn reduces equity faster than it would in an unleveraged investment.
What this assumes, and where it stops
Assumptions
- Rent, expenses and vacancy stay constant for the year modelled — no escalation.
- The property is financed with a standard fixed-rate amortising mortgage.
Limitations
- Does not model appreciation, depreciation tax benefits, or the eventual sale — this is a first-year operating snapshot, not a full investment return.
- Capital expenditures (roof, HVAC replacement) are different from routine maintenance and are not separately budgeted here.
Common questions
What is a "good" cap rate?
It depends entirely on the market and property type — cap rates in expensive coastal metros often run 3–5%, while higher-risk or slower-growth markets can show 8–10%+. A higher cap rate usually means either a better cash-flowing deal or a riskier one; it is a starting point for comparison, not a pass/fail number on its own.
Why does cash-on-cash return differ so much from cap rate?
Cap rate ignores financing; cash-on-cash return is built entirely around it. Leverage amplifies cash-on-cash return in both directions — a smaller down payment raises the potential return if the deal cash flows positively, but also raises the risk if it does not.
Sources
- Real estate investing basics — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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