Rental Property Calculator: Cash Flow, Cap Rate and ROI
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The cap rate of a rental is net operating income divided by the price. Cash-on-cash return is yearly cash flow after the mortgage divided by the cash you put in.
The property does not earn enough to cover the mortgage (coverage 0.85). You would put money in each month.
The property must be rented almost all year to break even. A small drop in rent or a vacancy could turn cash flow negative.
A $300,000 rental renting for $2,400 a month earns a net operating income of $16,287 a year (5.43% cap rate). After a mortgage payment of $1,596.73 a month, cash flow is −$2,874 a year on $69,000 invested, a −4.2% cash-on-cash return. Holding for 10 years, the total return is about 8.8% a year.
- Mortgage payments$19,160.7164%
- Taxes, insurance and HOA$5,100.0017%
- Maintenance, management and reserves$5,685.1219%
Year-by-year projection
| Year | Rent collected | NOI | Mortgage | Cash flow | Cash-on-cash |
|---|---|---|---|---|---|
| 1 | $27,072 | $16,287 | $19,161 | −$2,874 | −$4.2% |
| 2 | $27,884 | $16,775 | $19,161 | −$2,385 | −$3.5% |
| 3 | $28,721 | $17,279 | $19,161 | −$1,882 | −$2.7% |
| 4 | $29,582 | $17,797 | $19,161 | −$1,364 | −$2.0% |
| 5 | $30,470 | $18,331 | $19,161 | −$830 | −$1.2% |
| 6 | $31,384 | $18,881 | $19,161 | −$280 | −$0.4% |
| 7 | $32,325 | $19,447 | $19,161 | $287 | $0.4% |
| 8 | $33,295 | $20,031 | $19,161 | $870 | $1.3% |
| 9 | $34,294 | $20,632 | $19,161 | $1,471 | $2.1% |
| 10 | $35,323 | $21,251 | $19,161 | $2,090 | $3.0% |
Show the steps
- Rent collected: ($2,400 + $0) × 12 × (1 − 6.0%) = $27,072.00.
- Expenses: fixed $5,100.00 + 21.0% of rent ($5,685.12) = $10,785.12.
- NOI = $27,072.00 − $10,785.12 = $16,286.88. Cap rate = NOI ÷ price = 5.429%.
- Cash flow = NOI − mortgage ($19,160.71) = −$2,873.83. Cash-on-cash = −$2,873.83 ÷ $69,000.00 = −4.16%.
- Sale after 10 years: $403,175 − selling costs $24,190 − loan balance $205,950 = $173,035 to you.
Key rental ratios
NOI = rent collected − operating expenses (no mortgage)
Cap rate = NOI ÷ price
Cash-on-cash = (NOI − debt service) ÷ cash invested
DSCR = NOI ÷ debt service
Break-even occupancy = (fixed costs + debt service) ÷ (potential rent × (1 − variable cost share))
- Income tax, depreciation, and rental losses are not included. They can change returns a lot, so talk to a tax professional.
- Maintenance, vacancy and management are estimates. Use local numbers where you can.
Estimates for planning and learning, not financial, tax, legal or medical advice. Check figures with your lender, tax preparer or doctor before you act.
About this calculator
A rental property can look good on the listing and still lose money once vacancies, taxes, repairs and the mortgage are counted. This calculator walks through every step: income, operating expenses, mortgage, and sale.
It reports the standard measures investors use to compare deals: net operating income (NOI), cap rate, cash-on-cash return, debt service coverage ratio (DSCR), gross rent multiplier, the 1% rule, break-even occupancy, and total return including the eventual sale.
How to use it
- Enter the purchase price, down payment, mortgage rate and term.
- Enter the monthly rent, vacancy rate, property tax and insurance.
- Enter maintenance and property management as a percentage of rent.
- Open the options to add closing costs, HOA, growth rates, holding period and selling costs.
- Compare the returns and read the year-by-year projection.
What good numbers look like
- Cap rate: 5% to 10% is common, depending on the market and risk.
- Cash-on-cash return: many investors look for 8% or more.
- DSCR: lenders often want 1.25 or higher.
- 1% rule: monthly rent of at least 1% of the price is a quick screening test, which is hard to meet in expensive markets.
Costs people forget
Vacancy, repairs, capital replacements like roofs, and property management add up to well over half of rent in many cases. Use realistic numbers rather than the best case.
Sources
Quick check: test yourself
A property earns $21,000 of net operating income and costs $300,000. What is the cap rate?
Correct answer: 7%. Cap rate = NOI ÷ price = $21,000 ÷ $300,000 = 7%.
Does net operating income (NOI) include the mortgage payment?
Correct answer: No. NOI is income minus operating expenses. Mortgage payments are subtracted afterward to find cash flow.
You invest $60,000 cash and earn $4,200 a year after the mortgage. What is the cash-on-cash return?
Correct answer: 7%. 4,200 ÷ 60,000 = 0.07.
Pick an answer for each question.
Common questions
How do I calculate cap rate?
Divide net operating income by the purchase price. NOI is rent collected minus operating expenses, before the mortgage.
What is cash-on-cash return?
Yearly cash flow after the mortgage divided by the cash you invested, including down payment and closing costs.
What is the 1% rule?
A quick test that monthly rent should be at least 1% of the purchase price.
What is DSCR?
Debt service coverage ratio is NOI divided by yearly mortgage payments. A value above 1 means the property covers its loan.
Is rental income taxed?
Yes. Net rental income is taxable, though depreciation and expenses reduce it. This calculator ignores taxes.
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