Rental Property ROI Calculator
Estimate a rental’s annual cash flow, cap rate and cash-on-cash return from its price, rent, expenses and mortgage.
How it works
NOI = annual rent − operating expenses · Cap rate = NOI ÷ purchase price · Cash flow = NOI − mortgage · Cash-on-cash = cash flow ÷ cash invested
Two returns describe a rental. The cap rate divides net operating income — rent minus operating expenses, before any loan — by the purchase price, so it measures the property itself regardless of how it is financed. Cash-on-cash return divides the actual pre-tax cash flow (after the mortgage) by the cash you put in, so it measures your leveraged return as an investor. Note that operating expenses exclude the mortgage: the loan is financing, not an operating cost, which is why it is subtracted only after the cap rate is set.
Worked example
A $300,000 property renting for $2,500 a month collects $30,000 a year. With $750 a month ($9,000 a year) in taxes, insurance, maintenance and management, NOI is $21,000 — a 7.0% cap rate. After a $14,400 annual mortgage, cash flow is $6,600, an 11.0% cash-on-cash return on a $60,000 down payment.
Frequently asked questions
What is a good cap rate?
It depends on the market and risk — many rentals trade in a rough 4%–10% range, with lower cap rates in expensive, stable areas and higher ones where risk or vacancy is greater. Compare against similar local properties rather than a universal target.
Why does this ignore vacancy?
To keep the inputs simple, it assumes the unit is rented every month. Real investors set aside a vacancy allowance — often 5%–8% of rent — plus a capital-expenditure reserve, both of which lower the true return.
What is the difference between cap rate and cash-on-cash?
Cap rate ignores your loan and judges the property on its own; cash-on-cash includes the mortgage and measures the return on the cash you actually invested. Leverage usually makes cash-on-cash higher than the cap rate when the property cash-flows.
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Educational estimate, not investment or tax advice. Returns are never guaranteed and past performance does not predict the future. Confirm with a licensed advisor.