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Rental Property Calculator – Cash Flow and ROI

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Estimate the cash flow and return of a rental property. Enter the purchase price, financing, rent, expenses and growth assumptions to get NOI, cap rate, cash-on-cash return, DSCR, the 1% rule check, total profit over the hold and IRR.

Analyze Cash Flow, Returns and the 1% Rule

Input Fields
Your purchase
$
$
$
Upfront work needed to make the unit rentable.
%
100% = all-cash purchase, no mortgage.
%
Annual rate on the loan.
years
Rental income
$/mo
$/mo
Laundry, parking, pet fees, late fees, etc.
%
Share of gross income lost to empty units and turnover — investors often assume 5–10%.
Recurring expenses
$/yr
$/yr
$/mo
Enter 0 if the property has no association.
%
Percent of the monthly rent set aside for routine repairs.
%
Percent of the monthly rent paid to a manager — enter 0 if you self-manage.
%
Percent of the monthly rent for big-ticket items (roof, HVAC, appliances).
Growth and your exit
%/yr
%/yr
Rent and the percentage-based expenses grow at this rate.
years
1 to 50 years — how long you keep the property before selling.
%
Agent commissions and closing costs as a percent of the sale price.
If enabled, the result will update automatically when you change any value.

Rental Property Formula

Formula
\[ P = L\,\frac{i\,(1+i)^n}{(1+i)^n - 1} \\ \text{NOI} = \Big[(R + O)(1-v) - \tfrac{T}{12} - \tfrac{I}{12} - H - R\,(m_q + m_g + m_c)\Big] \times 12 \\ \text{CF} = \text{NOI} - 12P \\ \text{Cap rate} = \frac{\text{NOI}}{C}, \quad \text{Cash-on-cash} = \frac{\text{CF}}{K}, \quad \text{DSCR} = \frac{\text{NOI}}{12P} \\ \text{Cash invested } K = \text{down payment} + \text{closing costs} + \text{repairs} \\ \text{Profit} = \sum \text{CF} + \text{sale price} \times (1-s) - \text{loan balance} - K \]

Where:

  • \(L\) — loan amount (purchase price minus down payment)
  • \(i\) — monthly interest rate, \(n\) — total number of monthly payments
  • \(P\) — monthly mortgage payment, \(\text{CF}\) — annual cash flow
  • \(R\) — monthly rent, \(O\) — other monthly income, \(v\) — vacancy rate (as a decimal)
  • \(T\) — annual property taxes, \(I\) — annual insurance, \(H\) — monthly HOA fees
  • \(m_q, m_g, m_c\) — maintenance, management and CapEx as a decimal share of the monthly rent
  • \(C\) — purchase price, \(K\) — total cash invested, \(s\) — selling costs (agent fees, closing) as a decimal

The first line is the standard amortizing-payment formula; the second computes net operating income (rent plus other income, reduced by vacancy, minus operating expenses — the mortgage is not an operating expense). Cash flow subtracts debt service, and the ratios compare income to price, to your own cash and to the loan payments. Total profit adds up every year's cash flow plus the net proceeds from selling at the end of the hold.

Rental Property – Calculation Example

Example: a $200,000 property bought with 25% down and a 7%, 30-year mortgage, plus $5,000 closing costs and $8,000 of repairs. It rents for $2,000 per month with 5% vacancy; expenses are $2,400/yr in taxes, $1,200/yr in insurance, no HOA, and 18% of rent for maintenance, management and CapEx (5% + 8% + 5%). Held 10 years with 3% appreciation, 3% rent growth and 6% selling costs.

\[ L = 200{,}000 \times 0.75 = 150{,}000 \;\Rightarrow\; P = 150{,}000 \times \frac{0.0058333 \times 1.0058333^{360}}{1.0058333^{360} - 1} = 997.95 \text{ per month} \]

\[ K = 50{,}000 + 5{,}000 + 8{,}000 = 63{,}000 \]

\[ \text{NOI} = \big[2{,}000 \times 0.95 - 200 - 100 - 0 - 360\big] \times 12 = 1{,}240 \times 12 = 14{,}880 \]

\[ \text{CF} = 14{,}880 - 12 \times 997.95 = 2{,}905 \text{ per year} \approx 242 \text{ per month} \]

Result: cap rate = 14,880 / 200,000 = 7.44%; cash-on-cash = 2,905 / 63,000 = 4.61%; DSCR = 14,880 / 11,975 = 1.24. The $2,000 rent is exactly 1.00% of the price, so the deal just passes the 1% rule. Over 10 years the property grows to about $268,800, leaving roughly $123,900 in sale proceeds after the loan and selling costs; adding about $56,200 of accumulated cash flow gives a total profit of about $117,000 — an IRR of roughly 13.2% on your $63,000.

How to use the Rental Property Calculator

  1. Under Your purchase, enter the Purchase price, Closing costs (see the Closing Costs Calculator for realistic numbers) and any Repair / renovation costs needed to make the unit rentable.
  2. Enter your financing: Down payment as a percent of the price (enter 100 for an all-cash buy), the annual Interest rate and the Loan term in years.
  3. Under Rental income, fill in the Monthly rent, Other monthly income (laundry, parking, pet fees) and a Vacancy rate — 5–10% is a common assumption.
  4. List your Recurring expenses: annual Property taxes (estimate them with the Property Tax Calculator) and Insurance, monthly HOA fees, and the percentages of rent for Maintenance, Property management and Capital expenditures. Enter 0 for management if you self-manage.
  5. Set your Growth and exit assumptions: Home appreciation, Rent growth, the Holding period and Selling costs as a percent of the sale price.
  6. Read the results: the deal summary, the 1% rule check, the long-hold metrics with IRR, and the year-by-year table showing value, rent, NOI, cash flow, loan balance and equity.

What this calculator measures

The calculator answers the two questions every investor asks before buying: does the property pay me each month? and what total return do I get over the hold? The monthly answer is cash flow — what is left of the rent after vacancy, operating expenses and the mortgage. A positive cash flow means the tenant effectively pays down your loan; a negative one means you subsidize the property out of pocket.

Net operating income (NOI) strips out the mortgage on purpose: it shows the property's earning power from operations alone, so it can be compared across deals regardless of how each one is financed. Dividing NOI by the purchase price gives the cap rate, the standard yardstick for income properties. Dividing annual cash flow by the cash you put in gives the cash-on-cash return — what your down payment and closing costs actually earn you in year 1. To compare an unleveraged property with other assets, use the companion Cap Rate Calculator.

The DSCR (debt service coverage ratio) divides NOI by the annual mortgage payments. Lenders typically want at least 1.2, meaning the property earns 20% more than it costs to service the debt — below that, the loan is riskier and may be harder to get. The 1% rule is a quicker screen: monthly rent should be at least 1% of the purchase price. It ignores financing entirely, so treat it as a first filter, not a verdict — a deal can fail the rule yet produce solid cash flow with a big down payment, or pass it and still bleed money through taxes and HOA fees.

For the long view, the calculator simulates every year of the hold with growing rent and appreciation, then reports total profit and the IRR — the annualized rate that makes all those yearly cash flows (money in at purchase, cash flow each year, sale proceeds at the end) add up to zero. IRR is the most honest single number for a hold, because it accounts for both when money arrives and how much of your own cash is tied up. Keep an eye on the equity column too: it combines price appreciation with the principal your tenants pay off, which you can track in more detail with the Home Equity Calculator.

Assumptions and limitations

  • Property taxes, insurance and HOA fees are held constant over the hold; in reality taxes often reset after a sale and premiums rise, so re-run the numbers with higher values to stress-test the deal.
  • Rent, other income and the percentage-based expenses (maintenance, management, CapEx) all grow at the rent growth rate you enter.
  • Income taxes are not modeled. Depreciation, mortgage interest deductions and capital gains tax on the sale can change your after-tax result significantly — consult a tax professional for that layer.
  • No vacancy between tenants is modeled beyond the flat vacancy rate, and there is no allowance for leasing fees, tenant turnover costs or evictions.
  • The IRR assumes cash flows arrive once a year (a slight simplification of monthly reality) and that the property sells at the end of the holding period at the appreciated value minus your selling costs.
  • Use conservative inputs: a higher vacancy (8–10%), maintenance (8–10% of rent) and CapEx reserve is a safer planning basis than the most optimistic values, and a deal that only works at 0% vacancy is not a deal.
  • Whether renting out a property beats owning your own home comes down to local numbers — the Rent vs Buy Calculator covers the owner-occupant side of that comparison.

Frequently Asked Questions

What is a good cap rate for a rental property?

A cap rate of about 4–6% is typical for a leveraged purchase to generate positive cash flow with a 30-year mortgage. Single-family homes in desirable areas often run 3–5%, while higher-risk or lower-price markets can reach 8–10%. What counts as "good" depends on your alternative investments and local risk: a higher cap rate usually signals more risk, slower appreciation, or a weaker tenant pool rather than a better deal.

What is a good cash-on-cash return on a rental?

Many investors aim for at least 8% cash-on-cash before tax, roughly in line with long-run stock returns, with 10%+ considered strong. Expect it to rise in later years as rents grow while the mortgage payment stays fixed. Note that cash-on-cash ignores equity build-up and appreciation, so a modest 5% today can still be part of an excellent total return.

Why is the mortgage payment not included in net operating income?

NOI measures the property's income from operations, and financing is a personal choice, not an operating cost. Two investors can own identical buildings with different loans, so including debt would make the properties look different even though their earning power is the same. That is also why appraisers and lenders strip out debt service when valuing income property. Debt's effect appears in cash flow, cash-on-cash and DSCR instead.

What DSCR do lenders actually require for an investment property?

Most lenders want a DSCR of at least 1.2 to 1.25 on a rental loan, though some programs (including DSCR mortgage products built for investors) approve loans closer to 1.0 or even slightly below in exchange for higher rates or reserves. A ratio under 1.0 means the property does not cover its own loan payments, which is a clear red flag for a buy-and-hold strategy.

What is the 50% rule and how does it compare to this calculator?

The 50% rule is a quick heuristic: operating expenses (vacancy, taxes, insurance, maintenance, management, CapEx) tend to eat about half of gross rent, so only the other half is available for the mortgage and profit. This calculator models each expense separately instead of assuming a fixed half, which is more accurate when your taxes, HOA or management arrangement is unusual. If your modeled expenses come out far below 50% of rent, double-check your inputs.

How does a bigger down payment change my returns?

A larger down payment lowers the mortgage payment, so monthly cash flow and DSCR rise. But it also shrinks leverage: cap rate is unchanged (it does not depend on financing), while cash-on-cash can go up or down depending on the interest rate. A small down payment magnifies both gains and losses, so if a deal only shows positive cash flow at 40% down, it is usually fragile at 20%.

Why is my actual profit different from what the calculator shows?

Real results drift from projections because rent growth, appreciation, vacancy and repair costs never follow a smooth curve — a roof or an eviction can wipe out several years of projected cash flow. The model also holds taxes and insurance flat, while they often rise after purchase, and it ignores income taxes, depreciation benefits and capital-gains tax on the sale. Treat the output as a planning estimate and stress-test with pessimistic inputs before committing money.

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