Rental Property ROI Calculator
Cash flow, cap rate & cash-on-cash return
Sizing up a rental? Enter the purchase price, financing, rent and operating costs to see whether the deal actually cash-flows. This rental property calculator reports monthly cash flow, cap rate and cash-on-cash return together, and counts the two things most spreadsheets quietly leave out: vacancy and closing costs.
The three returns a rental has to clear
One number cannot describe a rental, because a property can cash-flow badly and still be a decent asset, or look wonderful on paper and drain you every month. A real estate ROI assessment rests on three figures read together:
- Monthly cash flow — what is left after the mortgage and every operating cost. This is the number that decides whether you can hold the property through a bad year.
- Cap rate — net operating income divided by price, ignoring financing entirely. Because it strips out your loan, it compares one property with another rather than one buyer with another. Used as a cap rate calculator, this is the figure to take to a second deal.
- Cash-on-cash return — annual cash flow divided by the cash you actually put in. This is your return, on your money, with your mortgage.
On the default deal — $250,000, 20% down at 7% over 30 years, $2,200 rent and $700 of monthly operating costs — the property produces $16,680 of annual NOI, a 6.67% cap rate, and just $59.40 a month of cash flow. That is a 1.23% cash-on-cash return: worse than a savings account, for a job that comes with tenants.
Vacancy and closing costs are not rounding errors
Two omissions flatter almost every back-of-envelope rental estimate, and this calculator includes both.
Vacancy. No unit is rented 100% of the time. A 5% allowance on $2,200 rent is $110 a month — which on this deal is nearly twice the entire cash flow. Between tenants you lose rent, and you often pay for cleaning and listing on top.
Closing costs. Typically 2–5% of the price, and they leave your bank account exactly like the down payment does. Ignoring them understates the cash invested and overstates the return.
Run the same deal with both ignored and it reports $169.40 of monthly cash flow and a 4.07% cash-on-cash return. Include a 5% vacancy allowance and $8,000 of closing costs and the truth is $59.40 and 1.23%. Cash flow falls by 65% and the return by 70% — from two inputs that every real deal has.
Rent-to-price is the fastest screen there is
Before financing, before spreadsheets, divide the monthly rent by the purchase price. That single ratio predicts almost everything else, which is why experienced investors use it to reject deals in seconds.
| Monthly rent | Rent as % of price | Monthly cash flow | Cap rate | Cash-on-cash |
|---|---|---|---|---|
| $1,750 | 0.70% | −$368.10 | 4.62% | −7.62% |
| $2,000 | 0.80% | −$130.60 | 5.76% | −2.70% |
| $2,200 | 0.88% | $59.40 | 6.67% | 1.23% |
| $2,500 | 1.00% | $344.40 | 8.04% | 7.13% |
| $2,750 | 1.10% | $581.90 | 9.18% | 12.04% |
| $3,000 | 1.20% | $819.40 | 10.32% | 16.95% |
$250,000 price, 20% down at 7% over 30 years, $700 monthly operating costs, 5% vacancy, $8,000 closing costs.
This is where the old 1% rule comes from: rent at 1% of price per month is roughly the line at which a leveraged deal cash-flows properly. At 0.88% the property clears $59 a month; at 1.00% it clears $344. In much of the US that ratio has not been available for years, which is a fact about the market rather than a reason to force the numbers.
What leverage does in both directions
A mortgage magnifies whatever the property does. More debt means less cash in the deal, so the same dollar of cash flow is a bigger percentage return — until the payment exceeds what the property earns, at which point it magnifies the loss just as efficiently.
| Down payment | Monthly cash flow | Cash-on-cash | Year-1 principal paid | Year-1 total return |
|---|---|---|---|---|
| 0% | −$273.26 | −40.99% | $2,540 | −9.24% |
| 20% | $59.40 | 1.23% | $2,032 | 4.73% |
| 25% | $142.56 | 2.43% | $1,905 | 5.13% |
| 30% | $225.72 | 3.26% | $1,778 | 5.41% |
| 40% | $392.05 | 4.36% | $1,524 | 5.77% |
| 100% | $1,390.00 | 6.47% | — | 6.47% |
Same deal, varying only the down payment. Paying cash removes the mortgage entirely, so there is no principal to pay down.
Two things stand out. Buying with nothing down turns a marginal property into a $273-a-month liability, and the cash-on-cash figure becomes meaningless because the denominator is only the closing costs. And paying cash produces the best cash flow but a return that converges on the cap rate, because with no loan the two measures are the same thing.
The return your tenant pays that never shows up as cash
Part of every mortgage payment reduces the loan balance. In year one of the default deal that is $2,032 of principal — equity you own, funded by rent. It is not money you can spend, so it is reported separately, but it is real: it turns a 1.23% cash-on-cash return into a 4.73% year-one total return.
Notice from the table that principal paydown is larger at lower down payments, because the loan is bigger. It is one of the few things that genuinely favours leverage — provided the property cash-flows at all.
Operating costs people underestimate
The operating expense field is one box, and getting it wrong invalidates everything downstream. It should contain every recurring cost except the mortgage:
| Cost | Typical range | Commonly forgotten because |
|---|---|---|
| Property tax | 0.3–2.5% of value a year | It is escrowed, so it hides inside the mortgage payment |
| Insurance | Higher than an owner-occupied policy | Landlord cover costs more than the quote you remember |
| Repairs & maintenance | Often budgeted at 5–10% of rent | Nothing breaks in year one, so it feels like free money |
| Capital expenditure | Roof, HVAC, water heater | It arrives once a decade in one large lump |
| Property management | Frequently 8–10% of rent | Self-managing is a job you are choosing not to price |
| HOA fees, utilities, landscaping | Varies | They belong to the property, not the tenant |
Ranges vary widely by market — use quotes for your own property rather than these as inputs.
Where a rental ROI estimate goes wrong
- Counting appreciation as return. Price growth is a forecast, not income. Every figure here is deliberately based on what the property earns today.
- Self-managing and calling it profit. If you do the work yourself, your cash flow includes wages you are paying yourself. Price management in and see whether the deal still works.
- Using a cap rate on a financed deal. Cap rate ignores the mortgage on purpose. It compares properties, not investments.
- Assuming rent rises but costs do not. Taxes, insurance and repairs all rise, and insurance has risen faster than rent in several US markets recently.
- Forgetting income tax and depreciation. Rental income is taxable, and depreciation offsets part of it. Both change the outcome and neither is modelled here.
An estimate for screening deals — not investment, tax or legal advice, and not a substitute for your own due diligence. Verify every number before buying.
How this rental property roi calculator works out its numbers
Net operating income is rent − vacancy allowance − operating expenses, excluding the mortgage. Cap rate is annual NOI ÷ purchase price. Cash flow is NOI minus the mortgage payment, which is the standard amortised formula. Cash-on-cash return is annual cash flow ÷ (down payment + closing costs).
- Vacancy is applied to rent, not to NOI. An empty unit loses the rent but still incurs taxes, insurance and maintenance, so the allowance is deducted before operating costs rather than after.
- Closing costs count as invested capital. They are typically 2–5% of price. Excluding them, as most quick estimates do, inflated the cash-on-cash return on the default deal from 1.23% to 4.07%.
- Year-one principal is amortised month by month, not approximated: each month's interest is the outstanding balance × the monthly rate, and the remainder of the payment reduces the balance. That gives $2,032 in year one on a $200,000 loan at 7%.
- Nothing is assumed to grow. No rent increases, no appreciation, no expense inflation. Every figure describes the property as it is today, because growth assumptions are where rental spreadsheets do most of their lying.
- Pre-tax throughout. Income tax, depreciation and any deductible interest are outside the model and depend on your own position.
Reviewed September 2026.
Figures reviewed . Every worked example on this page is checked against the calculator above.
Rental Property ROI Calculator: frequently asked questions
What is a good cap rate?
It varies by market and risk — many investors look at 5–10%, with lower cap rates in expensive, stable areas and higher ones where risk or vacancy is greater. Compare cap rates within the same market, never across different ones.
What is cash on cash return?
Annual pre-tax cash flow divided by the cash you actually invested — down payment plus closing costs. It answers what your own money earned, with your mortgage in place, unlike cap rate which ignores financing.
What is the difference between cap rate and cash-on-cash return?
Cap rate divides net operating income by the purchase price and ignores the loan, so it describes the property. Cash-on-cash divides cash flow by the cash you put in, so it describes your deal. Buy for cash and the two converge.
What is the 1% rule in real estate?
A screening shortcut: monthly rent should be at least 1% of the purchase price. On a $250,000 property that is $2,500 a month, which in this calculator produces $344 of monthly cash flow versus $59 at 0.88%.
How much should I budget for vacancy?
5% of rent is a common starting allowance, higher in markets with heavy turnover or seasonal demand. On $2,200 rent that is $110 a month — often most of the cash flow on a marginal deal.
Should closing costs count in my ROI?
Yes. They are cash out of your pocket, typically 2–5% of the price, so they belong in the denominator of cash-on-cash return. Leaving them out overstated the return on the example deal from 1.23% to 4.07%.
Does principal paydown count as a return?
It is a real return but not cash. In year one of the example, $2,032 of the mortgage payment reduces the loan balance, lifting the total year-one return to 4.73% from a 1.23% cash-on-cash figure. You cannot spend it until you sell or refinance.
Why does zero down give a negative return?
Because the property does not earn enough to cover a full-sized mortgage — it loses $273 a month. Leverage multiplies whatever the property does, and with only closing costs invested, that loss becomes a very large negative percentage.
Does this calculator include income tax or depreciation?
No. It reports pre-tax cash flow. Rental income is taxable and depreciation offsets part of it, both of which depend on your own tax position — speak to an accountant for the after-tax picture.