Rental Property Calculator
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What Your Result Means
- Monthly Cash Flow: The money left after all expenses (mortgage, tax, insurance, maintenance) are paid from rental income. Positive cash flow means the property pays for itself; negative means you're subsidizing it out of pocket.
- Cap Rate: Net operating income divided by purchase price, expressed as a percentage. It measures the property's unlevered yield — what you'd earn if you paid all cash. Typical residential cap rates range from 4–10% depending on market.
- Cash-on-Cash Return: Annual cash flow divided by your actual cash invested (down payment). This tells you how hard your out-of-pocket money is working. A 8–12% cash-on-cash return is generally considered strong.
- Total ROI: Includes both cash flow and equity buildup from principal paydown. This gives a fuller picture but doesn't account for appreciation or tax benefits.
How This Calculator Works
You enter the purchase price, financing terms, expected monthly rent, and operating expenses (property tax, insurance, maintenance, vacancy). The tool computes a standard amortization mortgage payment, subtracts vacancy from gross rent, then deducts all monthly expenses to arrive at cash flow. Cap rate uses gross annual rent against price; cash-on-cash compares annual cash flow to your down payment.
Quick Questions
What vacancy rate should I use?
A 5% vacancy rate is a common conservative estimate for residential rentals, representing roughly 2–3 weeks of vacancy per year for tenant turnover. In hot rental markets you might use 3%; in weaker markets, 8–10%.
Does this include property management fees?
No. If you plan to hire a property manager, add their fee (typically 8–12% of collected rent) to your monthly expenses. Self-managing saves money but requires time and effort.
What's the 1% rule?
The 1% rule is a quick screening test: monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month to have a chance at positive cash flow. It's a rough filter, not a guarantee.
How does depreciation affect real returns?
Residential rental property can be depreciated over 27.5 years for tax purposes, which creates a paper loss that offsets rental income. This tax benefit isn't modeled here but can significantly improve after-tax returns. Consult a tax professional.
Is cap rate or cash-on-cash more important?
Cap rate measures the property's intrinsic yield regardless of financing. Cash-on-cash measures your actual return on invested capital. If you're comparing properties, use cap rate. If you're evaluating your personal return, cash-on-cash is more relevant.
Sources
- IRS Publication 527 — Residential Rental Property (depreciation rules, deductible expenses)
- National Association of Realtors — Research & Statistics (rental market data, cap rate benchmarks)
- CFPB — Owning a Home (mortgage and property cost fundamentals)
Method & review
Estimate only. Results reflect your inputs and standard formulas. Double-check important decisions independently.