Rental Property Calculator
Turn a listing into the numbers investors underwrite on: net operating income, monthly cash flow and cash-on-cash return.
What this calculator does
This rental property calculator turns a listing into the three numbers investors actually underwrite on. Enter the purchase price, your down payment, the monthly rent, your annual operating expenses, and a vacancy allowance, and it returns net operating income, the cap rate, and the cash-on-cash return your down payment earns.
NOI is rent net of vacancy and operating expenses but before any mortgage payment — it describes the property. Cap rate is that NOI divided by price, which lets you rank properties regardless of how each is financed. Cash-on-cash brings your loan back in and tells you what the cash you actually put down is earning. The year-by-year table shows effective rent, expenses, and NOI as rents drift upward.
When to use it
Use it as a screening tool when a listing looks interesting, before you spend a Saturday on a showing. Ten minutes with real rent comps and a realistic expense figure eliminates most properties, which is the point.
It is also the right tool when deciding how much to put down. Raising the down payment from 20 to 30 percent reduces debt service and can flip cash flow positive, but it lowers cash-on-cash if the property is already earning more than the loan rate. And it settles whether to keep a house you are moving out of: enter what it would sell for today as the price and your equity as the down payment, and see whether the return justifies leaving that capital in the deal.
Understanding the inputs
Property price should be your expected purchase price, and if you are budgeting properly, add closing costs and any immediate repairs — a property needing $12,000 of work before it rents is really a $12,000 more expensive property. Down payment on an investment loan is typically 20 to 25 percent minimum.
Monthly rent must come from active comparable listings, not the seller's pro forma or what the current tenant pays under a below-market lease. Annual expenses should cover property taxes, insurance, management, maintenance, capital reserves, and any HOA or landscaping — but not the mortgage, which is handled separately. Vacancy rate at five percent is the standard default; raise it for high-turnover markets.
How is this calculated?
Monthly Cash Flow = Monthly Rent − Monthly Expenses − Mortgage Payment. Cash-on-Cash Return = (Annual Cash Flow / Down Payment) × 100.
A worked example
Take a $325,000 single-family rental with 25 percent down, so $81,250 of cash and a $243,750 loan at 7.25 percent over 30 years — an investor rate, not an owner-occupied one. Rent is $2,450 a month and annual operating expenses run $9,600.
Gross rent is $29,400; a five percent vacancy allowance brings effective rent to $27,930, and after expenses NOI is $18,330. That is a cap rate of 5.64 percent, which sounds respectable. But annual debt service is about $19,954, so cash flow is roughly negative $1,624 a year — a cash-on-cash return of about minus two percent. The property yields less unlevered than the loan costs, so the mortgage is destroying return rather than amplifying it.
Limitations and assumptions
The model captures operating economics only. It excludes closing costs, rehab, appreciation, principal paydown, depreciation, and the tax treatment of rental income — several of which are large. A property showing slightly negative cash flow can still be a reasonable investment after depreciation shelters other income and principal builds equity, though that is a much weaker case than positive cash flow.
It also assumes stable rent and expenses, which no rental delivers. Insurance premiums have risen sharply in coastal and wildfire-exposed states, property taxes reassess on sale in many counties, and one HVAC replacement can consume a year of cash flow. Verify the actual tax bill for the specific parcel, get an insurance quote before you are under contract, and treat any seller-supplied expense figure as a starting point for your own research.
Common Questions
- What is a good cash-on-cash return on a rental?
- Most investors look for eight percent or better on a leveraged single-family rental, and accept less in expensive coastal markets where appreciation carries the return. Anything under about four percent is competing badly with Treasuries, which pay similarly with no tenants, no roof, and no vacancy.
- What is the 1 percent rule?
- A screening shortcut: monthly rent should be at least one percent of the purchase price. A $325,000 house should rent for $3,250. Very few properties clear it in current markets, so treat it as a filter for which deals deserve a full analysis rather than a pass-fail test.
- Why is my cash flow negative when the cap rate looks fine?
- Negative leverage. If the property yields 5.6 percent unlevered and your investor mortgage costs 7.25 percent, borrowing subtracts from the return rather than adding to it. Cap rate ignores financing entirely, which is exactly why it can look healthy while the bank account drains every month.
- What should I budget for expenses?
- Beyond taxes and insurance, allow eight to ten percent of rent for property management, five to ten percent for maintenance, and five percent for capital reserves on roofs, HVAC, and water heaters. The 50 percent rule — that operating expenses consume half of gross rent — is crude but usually closer to reality than an optimistic spreadsheet.
- How much vacancy should I assume?
- Five percent is a common default and equates to roughly eighteen days a year empty. In a strong market with long-term tenants you might see two or three percent; in a college town with annual turnover, ten percent is more honest. Turnover costs include cleaning, paint, and listing time, not just lost rent.
- Do investment property mortgages cost more?
- Yes, noticeably. Expect roughly 0.5 to 0.875 percentage points above an owner-occupied rate, plus a minimum down payment of 20 to 25 percent, and stricter reserve requirements. Fannie Mae also charges loan-level price adjustments that rise with LTV, so a 25 percent down payment often prices better than 20.
- How does depreciation affect my return?
- Residential rentals depreciate over 27.5 years, so a $260,000 building basis generates about $9,450 of annual paper loss that shelters rental income from tax. It does not affect cash flow, but it often turns a taxable profit into a taxable loss. The catch is depreciation recapture at 25 percent when you sell.
- Should I self-manage or hire a property manager?
- Management typically costs eight to ten percent of collected rent plus a placement fee of half to a full month. Model the property with management included even if you plan to self-manage — otherwise you are paying yourself a wage and calling it a return, and the property will not survive your first out-of-state move.
- Does this calculator include appreciation?
- No. It measures income return only: NOI, cap rate, and cash-on-cash from operations. Appreciation and principal paydown are real components of total return but are speculative and slow, so they should never be the reason a deal with weak operating numbers gets bought.
Related calculators
- Cap Rate CalculatorFind the yield a property produces independent of financing, with implied value across a range of cap rates and the gross rent multiplier alongside.
- Cash-on-Cash Return CalculatorFind what percentage the cash you actually put in earns each year, after operating expenses, vacancy and mortgage payments.
- Gross Rent Multiplier CalculatorThe fastest screen in real estate: purchase price divided by annual gross rent, shown alongside cap rate and implied value.