Rental property calculator —
cash flow, cap rate & total return.

Field guide

The numbers every rental investor needs to know.

Cap rate: the unlevered yield

The capitalization rate is the most widely used metric for comparing rental properties on an apples-to-apples basis. It measures the property's income return independent of financing, what the asset itself earns before debt service:

where NOI = Annual Gross Rent (after vacancy) − Operating Expenses. Because cap rate ignores your mortgage, it lets you compare a property you'd buy all-cash with one you'd finance or compare properties in different markets, on the same scale. A cap rate of 6–8% is generally considered the "sweet spot" for single-family and small multifamily buy-and-hold investors in the US. Cap rates below 4% are typical in premium coastal markets and depend heavily on appreciation, not yield.

Cash-on-cash return: the leveraged yield

Once financing enters the picture, the relevant metric becomes cash-on-cash return:

Annual cash flow is the money left over after every expense including your mortgage payment. Total cash invested is your down payment plus closing costs. The actual dollars you wrote a check for. This is the number most active investors watch most closely, because it measures the yield on your actual out-of-pocket capital.

A cash-on-cash return of 5–10% is solid for leveraged single-family rentals at current mortgage rates. Negative cash-on-cash (you're subsidizing the property each month) is common in low-cap-rate markets; investors accept this when they expect strong appreciation to more than make up the shortfall.

Gross rent yield: the quick-filter metric

Gross rent yield (annual rent ÷ purchase price) is the crudest of the three metrics but the fastest to calculate, making it useful for screening dozens of listings quickly. A common rule of thumb is the 1% rule: monthly rent should equal at least 1% of the purchase price. A $300,000 property should rent for at least $3,000/month. Few markets meet this today, but it sets a useful ceiling/floor for deal-screening before running full numbers.

Total return: the full picture

Cash flow alone tells only part of the story. The real wealth-building power of rental property comes from three simultaneous engines:

• Operating cash flow: the monthly surplus after all expenses and debt service.
• Principal paydown: each mortgage payment builds equity. At 7.5% on a 30-year loan, about $300 of every $2,100 payment goes to principal in year one. That $300 is forced savings; it builds your net worth even when cash flow is zero.
• Appreciation: property values compound over time. At a modest 3% annual appreciation, a $300,000 property is worth $403,000 after 10 years. Combined with the leverage effect (you only put 20% down), your equity return on invested capital is far higher than 3%.

This calculator projects all three engines simultaneously in the year-by-year table and chart. The total return figure shows your net profit at the end of the holding period: cumulative operating cash flows plus the equity you'd walk away with after selling minus the cash you originally invested.

Key expenses to get right

• Vacancy rate. Budget 5–10% of gross rent for empty months, tenant turnover, and lease-up time between tenancies. Skipping this inflates your projected income by more than most investors expect.
• Maintenance and capital expenditure. The 1% rule (1% of property value per year) is a rough but widely used starting point for ongoing maintenance. Older properties may require 1.5–2%. Capital expenditures, roof, HVAC, appliances, are separate and unpredictable; many investors reserve an additional 5–10% of rent for CapEx.
• Property management. If you self-manage, the cost is your time. If you hire a manager, expect 8–12% of monthly rent plus a leasing fee (typically one month's rent). Model it in even if you're self-managing today. It's the cost you'd incur if you had to step back.
• Property taxes. Rates vary enormously by location: 0.3% of assessed value in Hawaii to over 2.4% in Illinois and New Jersey. Always verify the actual tax bill, not the listing's stated estimate.

Closing costs and the true cash invested

Closing costs for a purchase (title insurance, lender fees, prepaid escrow, transfer taxes) typically run 2–5% of the purchase price and must come out of pocket on top of your down payment. This calculator adds closing costs to your total cash invested before computing cash-on-cash and total-return metrics, so every ratio correctly reflects the actual capital you committed.

What this calculator doesn't model

This tool assumes constant operating expense amounts (except management, which scales with rent), a fixed annual appreciation rate, and no selling costs at the end of the holding period. Real sales incur 5–6% in agent commissions, transfer taxes, and closing costs; subtract those from your equity-at-sale figure for a conservative view of net proceeds. Tax treatment of rental income, depreciation deductions, and 1031 exchanges can also significantly affect your after-tax return and are outside the scope of this projection.

Disclaimer

For educational and planning purposes only. Past market performance does not guarantee future results. This is not investment, tax, or financial advice. Consult a licensed financial advisor and a real estate attorney before making investment decisions.