Rental Property Calculator

A rental only makes sense if the numbers work, and the listing price tells you almost nothing about that. Buy a $250,000 property with 25% down ($62,500) plus $8,000 in closing costs, finance the rest on a 30-year loan at 7%, and rent it for $2,200/month, and you land at roughly +$86 a month in cash flow, a 6.40% cap rate, and a 1.47% cash-on-cash return. Change a single input - the rent, the rate, the down payment - and all three numbers move. This rental property calculator turns a price and a rent into the three figures investors actually use to compare deals: cash flow, cap rate, and cash-on-cash ROI.

The three core formulas

Each metric answers a different question. Cash flow asks "does it pay for itself?", cap rate asks "how good is the property?", and cash-on-cash asks "how good is my return?":

Here NOI (net operating income) is annual rent minus annual operating expenses, and it deliberately leaves out the mortgage. Operating expenses include property tax, insurance, maintenance, a vacancy reserve, property management, and HOA dues. Total cash invested is your down payment plus closing costs and any upfront rehab. If you only want the property-level yield in isolation, the dedicated Cap Rate Calculator isolates that single figure.

A worked example, line by line

Take the $250,000 property above renting for $2,200/month. With 25% down, the loan is $187,500; at 7% over 30 years the mortgage principal and interest is about $1,247/month. Operating expenses run roughly $866/month: about $229 property tax (1.1%/yr), $125 insurance ($1,500/yr), $176 maintenance (8% of rent), $110 vacancy (5%), $176 management (8%), and $50 HOA/other. Subtract everything from the $2,200 rent and you keep about $86/month, or $1,037/year. NOI is the annual rent ($26,400) minus annual operating expenses ($10,394), about $16,006 - so the cap rate is 16,006 ÷ 250,000 = 6.40%. Your cash in is $62,500 down + $8,000 closing = $70,500, so cash-on-cash is 1,037 ÷ 70,500 = 1.47%.

How to use this calculator

Enter the deal in order; the result appears when you press Calculate:

1. Purchase price & monthly rent: the two numbers that drive everything. Use realistic, comparable rents - not the optimistic listing.
2. Down payment: entered as a percent; the calculator shows the dollar amount and computes your loan.
3. Interest rate & term: investment-property loans usually carry slightly higher rates than owner-occupied ones.
4. Closing & upfront costs: lender fees, title, inspection and any initial rehab. These add to your cash invested and lower cash-on-cash return.
5. Operating expenses: open the panel to set property tax, insurance, and the maintenance, vacancy and management percentages, plus HOA or other monthly dues.

Read the headline monthly cash flow, then check the cap rate and cash-on-cash ROI cards and the line-by-line monthly breakdown.

Who this calculator is for

• First-time investors screening listings to see which ones could actually cash flow.
• House hackers and BRRRR buyers checking returns after a down payment and rehab.
• Landlords deciding whether to keep, refinance, or sell an existing rental.
• Anyone comparing markets who wants cap rate and cash-on-cash side by side across cities.

Key terms explained

• Cash flow: what is left after every monthly cost, including the mortgage. The number that lands in (or leaves) your bank account.
• NOI (net operating income): annual rent minus operating expenses, before any mortgage. The foundation of cap rate.
• Cap rate: NOI ÷ price. A financing-neutral measure of the property's yield, used to compare deals.
• Cash-on-cash ROI: annual cash flow ÷ cash invested. Your personal return given your actual loan and down payment.
• Vacancy reserve: money set aside for months with no tenant; even great rentals are not occupied 100% of the time.
• Gross rent yield: annual rent ÷ price, before any expenses - a rough top-line comparison.

Scenario comparison: leverage changes your return

Cap rate describes the property and does not move with your loan - but cash-on-cash does. Using the same $250,000 / $2,200-rent deal at 7% with $8,000 closing costs, watch what the down payment does:

• 20% down ($50,000): ~$3/month cash flow, 6.40% cap rate, 0.07% cash-on-cash on $58,000 invested.
• 25% down ($62,500): ~$86/month cash flow, 6.40% cap rate, 1.47% cash-on-cash on $70,500 invested.
• 35% down ($87,500): ~$253/month cash flow, 6.40% cap rate, 3.18% cash-on-cash on $95,500 invested.

More money down means more monthly cash flow and, here, a higher cash-on-cash return, because a 7% loan cost is more than the 6.40% cap rate - so extra leverage actually drags the return down. When the cap rate comfortably exceeds the loan rate, the opposite happens and lower down payments boost cash-on-cash. That spread between cap rate and borrowing cost is the heart of leverage.

Two more scenarios: cheap vs. expensive markets

Markets behave very differently. A $180,000 home in a lower-cost area renting for $1,800 with 20% down can throw off about $124/month, a 7.21% cap rate and a 3.38% cash-on-cash return - solid current income. A $500,000 property renting for only $2,800 with 25% down can lose about $916/month, with a 3.79% cap rate and a negative cash-on-cash return: here you would be betting almost entirely on appreciation, not cash flow. Same calculator, opposite verdicts - which is exactly why running the numbers matters.

Quick screening rules: 1%, 2%, 50% and GRM

Experienced investors triage dozens of listings using back-of-the-envelope ratios before they ever open a full calculator. None of them replace the line-by-line numbers, but each one flags whether a deal is worth a closer look:

• The 1% rule: monthly rent should be at least 1% of the purchase price. A $250,000 home should rent for roughly $2,500. In most coastal and high-cost metros almost nothing clears this bar, while many Midwest and Sun Belt markets do - which is why cash-flow investors so often shop out of state.
• The 2% rule: a far stricter version (rent ≥ 2% of price) that mostly turns up in low-priced, higher-risk neighborhoods. A property hitting 2% usually carries heavier maintenance, turnover, or management headaches, so treat it as a flag to scrutinize, not a green light.
• The 50% rule: a planning shortcut that assumes operating expenses (everything except the mortgage) will eat about half of gross rent over the long run, once you average in vacancy, repairs, and the occasional big-ticket replacement. If half your rent covers operating costs and the other half must cover the mortgage with room to spare, the deal has a chance.
• Gross rent multiplier (GRM): price ÷ annual gross rent. A $250,000 home renting for $26,400/year has a GRM of about 9.5. Lower GRMs signal more rent per dollar of price; comparing GRMs across listings in the same market is a fast relative screen.

Use these to build a shortlist, then run each survivor through the full calculator. A deal that passes every rule of thumb can still lose money once a 2% property-tax bill or a steep insurance premium is layered in, and a deal that narrowly fails the 1% rule can still cash flow with a large enough down payment.

Financing vs. paying cash: how leverage reshapes the return

The single decision that most changes a rental's profile is how much you borrow. Paying all cash for the $250,000 example removes the $1,247 mortgage entirely, so monthly cash flow jumps to about $1,334 and the deal is guaranteed positive - but your $258,000 of cash (price plus closing) earns only the cap-rate-level return of roughly 6.2% cash-on-cash, because there is no leverage working for you. Financing the same property with 25% down ties up far less cash and lets you spread your capital across several doors, yet it introduces a fixed payment that does not pause when a tenant moves out.

The deciding factor is the spread between the cap rate and your borrowing cost. When the cap rate sits well above the loan rate, each borrowed dollar earns more than it costs, so leverage lifts cash-on-cash above the all-cash return - this is positive leverage. When the loan rate creeps up toward or past the cap rate, as in today's higher-rate environment, the spread narrows or inverts and borrowing actually drags your percentage return down, even though you have less cash at stake. That is why the same property can look like a strong buy at a 4% mortgage and a marginal one at 7%. Re-run the calculator at several down-payment levels and rates to see exactly where the crossover lands for your deal, and weigh the higher headline return of leverage against the lower risk and steadier cash flow of paying cash.

Building a realistic operating-expense budget

Understated expenses are the number-one reason a "cash-flowing" rental quietly loses money, so it pays to budget each line deliberately rather than guessing a single round number:

• Property tax: the largest fixed expense in most markets, ranging from under 0.4% of value in low-tax states to well over 2% in parts of the Northeast and Texas. Crucially, taxes are often reassessed to the new purchase price after a sale, so the seller's old tax bill can understate yours - verify the post-sale assessment.
• Insurance: a landlord (dwelling) policy usually costs more than an owner-occupied one, and premiums have risen sharply in coastal, wildfire, and flood-prone areas. Get a real quote rather than copying a national average.
• Maintenance and repairs: commonly planned at 5%-15% of rent. Newer, recently renovated homes sit at the low end; older properties with original systems run higher.
• Vacancy reserve: typically 5%-10% of rent. Even excellent rentals turn over, and each turnover means days or weeks of lost rent plus cleaning and make-ready costs.
• Property management: professional managers usually charge 8%-12% of collected rent plus a leasing fee. Even if you self-manage, budget this - it values your time and keeps the analysis honest if you ever hand the property off.
• Capital expenditures (CapEx): the lumpy big-ticket items - roof, HVAC, water heater, flooring - that are not monthly but inevitable. Many investors reserve a separate amount per month so a $9,000 roof does not blow up a single year's return.
• HOA and other dues: condos and some single-family communities charge monthly HOA fees that come straight off your cash flow and can rise faster than rent.

When in doubt, be generous with expenses and conservative with rent. A deal that still cash flows under pessimistic assumptions is far safer than one that only works in a best-case spreadsheet.

What this calculator deliberately leaves out

The headline figures here are pre-tax operating returns, which makes them a conservative floor - real total return on a rental usually comes from four sources, and three of them are not shown:

• Cash flow (shown): the money left after every monthly cost. This is the only component the calculator reports, and the one most exposed to vacancy and expense surprises.
• Loan paydown (not shown): every mortgage payment retires a little principal, quietly building equity even when cash flow is thin. Over years this can add a meaningful return that never touches your bank account until you sell or refinance.
• Appreciation (not shown): if the property's value rises, your equity grows on the full asset value, not just your down payment - the leverage that amplifies appreciation is a major reason real estate builds wealth, but it is impossible to predict and can also work in reverse.
• Tax benefits (not shown): depreciation can shelter a chunk of rental income from tax, and mortgage interest and most operating expenses are deductible. These effects vary so much by investor that they belong in a conversation with an accountant, not a generic calculator.

Because three of the four return drivers are excluded, a property that merely breaks even on cash flow can still be a sound long-term investment once paydown, appreciation, and tax treatment are added - and a property with strong cash flow but no growth prospects can underperform a more balanced deal. Use the cash-flow number as your safety check, not as the whole story.

What moves the result the most

• Rent-to-price ratio: the single biggest driver of cap rate and cash flow. The 1% rule is a quick screen.
• Interest rate: on a 30-year loan, each 1% of rate noticeably shifts the mortgage payment and your cash flow.
• Operating-expense assumptions: understating maintenance, vacancy and management is the classic way a "good" deal turns negative.
• Down payment: changes cash invested and cash flow, moving cash-on-cash up or down depending on the cap-rate-vs-rate spread.
• Property tax: ranges from under 0.4% to over 2% of value by county and is a major expense line.

Tips for analyzing a rental

• Be conservative on rent and generous on expenses. The downside surprises in real estate almost always come from optimistic assumptions.
• Separate CapEx from maintenance. A roof or furnace is a periodic, lumpy cost - reserve for it on top of routine repairs.
• Verify the tax bill, not the listing estimate. Taxes often reset to the new purchase price after a sale.
• Stress-test it. Re-run with one extra vacant month or a half-point higher rate to see if the deal still survives.

Limitations and assumptions

This is a planning estimate, not a guarantee or an offer:

• It models a fixed-rate loan and does not include PMI, balloon terms or ARM adjustments.
• It shows pre-tax cash flow - it does not model depreciation, the mortgage-interest deduction, or other tax effects.
• It excludes appreciation and loan paydown, which can be a large part of total long-term return.
• Expenses are treated as level, but rents, taxes, insurance and repairs all tend to rise over time.
• It does not separately reserve for capital expenditures unless you fold them into the maintenance percentage.

How it compares to related calculators

This page answers "is this rental a good deal right now?" For other questions, a sister tool fits better:

• To isolate just the property's yield, use the Cap Rate Calculator; to decide between owning and renting a home for yourself, use the Rent vs. Buy Calculator.
• To estimate the mortgage on the financing side, use the Mortgage Calculator, and to verify the local tax line, use the Property Tax Calculator.
• For general portfolio growth with contributions, use the Investment Calculator.
• To compute a simple or annualized return on any investment, use the ROI Calculator or the CAGR Calculator.
• To see how a lump sum or savings grow over time, use the Compound Interest Calculator or the Future Value Calculator.
• To plan long-term and check if you are on track to retire, use the Retirement Calculator.

Sources

• Consumer Financial Protection Bureau (CFPB) - Owning a Home: financing and closing-cost basics.
• Internal Revenue Service (IRS) - Publication 527, Residential Rental Property (income, expenses and depreciation).
• U.S. Census Bureau - Housing Vacancies and Homeownership (rental vacancy data).