How this rental property calculator works
It starts from the rent you collect, removes vacancy and operating costs, then compares what is left with the price you paid and your mortgage payment.
Collected rent = annual rent × (1 − vacancy). Net operating income (NOI) = collected rent − property tax − insurance − maintenance − management.
Cap rate = NOI ÷ price. Cash flow = NOI ÷ 12 − mortgage payment.
Cash-on-cash return = annual cash flow ÷ cash invested (down payment plus closing costs).
How to read the results
- Gross yield. Handy for comparing listings, but it ignores costs, so it always overstates the real return.
- Cap rate. NOI divided by price, independent of how you finance the purchase. It compares properties on a like-for-like basis.
- Monthly cash flow. What is left each month after the mortgage. A negative number means you top up the property from your pocket.
- Cash-on-cash return. Annual cash flow relative to the cash you put in. Leverage can raise it, but it also raises risk.
- The chart. It tracks your cumulative position, starting at the cash you invested. The marker shows when cash flow has paid you back, before any sale proceeds.
What the calculation leaves out
- Income taxes and depreciation, which change your after-tax return.
- Appreciation or decline in value and the principal your mortgage pays down.
- Large repairs beyond the maintenance percentage you enter.
To see the full payment on a loan, use the mortgage payment calculator.
Frequently asked questions
What is a good cap rate for a rental property?
There is no universal answer. Cap rates differ by city, property type and risk, and a higher cap rate usually reflects higher risk or a weaker market. Compare properties in the same area, and test your numbers with a realistic vacancy and maintenance allowance.
What is the difference between cap rate and cash-on-cash return?
The cap rate is net operating income divided by the price and ignores financing. Cash-on-cash return is your annual cash flow after the mortgage divided by the cash you invested, so it depends on your loan terms.
Why include vacancy and maintenance?
Properties are rarely rented 12 months a year, and every building needs repairs. Leaving these out makes returns look better than they are. Five percent vacancy and 5% to 10% of rent for maintenance are common planning assumptions, not guarantees.
Is negative cash flow always bad?
Not necessarily, if you accept the monthly cost for the sake of the principal you repay and possible appreciation. It does mean you carry risk if rents fall or costs rise, so make sure you can cover the gap comfortably.
Does the calculator include taxes on rental income?
No. Income tax, depreciation and capital gains tax depend on your situation. Treat the results as before-tax figures and check them with a tax professional.
Sources
This tool is for general information and illustration. It is not personalized advice. Confirm the figures with a qualified professional. See our editorial standards.
