Rental Property Calculator

Analyze any rental property in seconds — cash flow, cap rate, cash-on-cash return, NOI, and IRR, all updated in real time.

Monthly Cash Flow
—
—/yr
Cash-on-Cash Return
—
Year 1
Cap Rate
—
Year 1 NOI / Price
IRR
—
over 10 years
— Enter values to check the 1% rule
Not sure what to charge for rent? Get rental comps and market data at PropMetrics.co

Expense Breakdown

Cash Flow Projection

First Year Breakdown

ItemMonthlyAnnual
Gross Rent——
Vacancy Loss——
Effective Income——
Mortgage P&I——
Property Tax——
Insurance——
HOA——
Maintenance——
Prop. Management——
CapEx Reserve——
Total Expenses——
NOI——
Cash Flow——
Total Cash Invested
—
Loan Amount
—
Monthly Mortgage
—
Gross Rent Multiplier
—
Debt Service Coverage
—
Break-even Occupancy
—

How to Analyze a Rental Property

Successful real estate investing starts with rigorous financial analysis. Before committing to a purchase, you need to understand exactly what a property will earn — and cost — on a monthly, annual, and long-term basis. This calculator handles all of that math instantly, but knowing what the numbers mean is equally important.

Step 1: Calculate Your Total Cash Investment

Your upfront cash outlay isn't just the down payment. Add closing costs (typically 2–5% of the purchase price), any immediate repairs, and reserves. This is your denominator for cash-on-cash return and sets your breakeven timeline.

Step 2: Estimate Effective Gross Income

Start with gross annual rent, then subtract vacancy losses. A 5% vacancy rate is a common baseline, but in strong rental markets you may see 2–3%, while weaker markets can run 8–10%. Effective Gross Income (EGI) = Gross Rent × (1 − Vacancy Rate).

Step 3: Identify All Operating Expenses

New investors consistently underestimate expenses. Include all of the following:

  • Property tax — look up actual rates for the county, not estimates
  • Insurance — landlord policy, not homeowner's; typically 15–25% more
  • Maintenance & repairs — budget 1–2% of property value per year
  • Capital expenditures (CapEx) — roof, HVAC, appliances; reserve 5–10% of rent monthly
  • Property management — 8–12% of collected rent if you don't self-manage
  • HOA fees — fixed monthly or annual, non-negotiable
  • Utilities — if you pay water, trash, or common area electric

Step 4: Calculate NOI and Cap Rate

Net Operating Income (NOI) = EGI − Operating Expenses. Cap Rate = NOI ÷ Purchase Price. The cap rate lets you compare properties independent of financing. A 6% cap rate means the property earns 6 cents for every dollar of property value, before debt service.

Step 5: Layer in Financing

Subtract your annual mortgage payment from NOI to get Cash Flow. This is where leverage either works for you (amplifying returns) or against you (negative cash flow). Positive cash flow from day one is the goal — but appreciation and equity paydown matter too.

Step 6: Evaluate Long-Term Returns (IRR)

IRR accounts for every dollar in and out over your entire holding period, including the eventual sale. It's the most complete single-number measure of investment performance. A rental property IRR of 10–15% is generally excellent; 15%+ is outstanding.

Key Metrics Explained

Monthly Cash Flow

Cash flow is the money left over each month after paying every expense, including mortgage. It's simple: Income − All Expenses = Cash Flow. Positive cash flow means the property pays you. Negative means you're subsidizing it from other income, banking on appreciation. Either can be a valid strategy, but you need to know which you're doing.

Cap Rate (Capitalization Rate)

Cap rate = NOI ÷ Purchase Price. It measures a property's income relative to its value, independent of how it's financed. Use it to compare deals in the same market. Don't use it to compare across very different markets — a 4% cap rate in Manhattan isn't the same risk profile as a 4% cap rate in rural Ohio.

  • Under 4% — typical in premium urban/coastal markets; appreciation-driven
  • 5–7% — balanced markets; decent income with moderate appreciation
  • 8–12% — higher-yield markets; stronger cash flow, often less appreciation
  • 12%+ — high yield, higher risk; investigate why carefully

Cash-on-Cash Return

CoC Return = Annual Cash Flow ÷ Total Cash Invested. This is the metric for evaluating your actual return on the money you put in, accounting for leverage. A 10% CoC return means your $60,000 down payment generated $6,000 in cash this year. Strong CoC returns are typically 8–12%+.

Gross Rent Multiplier (GRM)

GRM = Purchase Price ÷ Annual Gross Rent. A lower GRM means you're paying less per dollar of rent. Under 10 is often attractive; over 15 is expensive relative to income. GRM is a quick screening tool, not a substitute for full analysis.

Debt Service Coverage Ratio (DSCR)

DSCR = NOI ÷ Annual Mortgage Payment. Lenders use this to qualify investment property loans. A DSCR of 1.0 means NOI exactly covers your mortgage. Most lenders require 1.2–1.25. A DSCR below 1.0 means you need out-of-pocket money to cover the mortgage each month.

Internal Rate of Return (IRR)

IRR is the annualized return on all cash flows over the entire investment — down payment, annual cash flows, and sale proceeds. Unlike simple ROI, it accounts for the time value of money. Two investments with the same total profit but different timelines will have different IRRs. It's the gold standard metric for comparing real estate against other investments.

Rules of Thumb

The 1% Rule

Monthly rent should be at least 1% of the purchase price. A $250,000 property should rent for $2,500/month. This rule was born in an era of lower prices and interest rates — in expensive markets, it's nearly impossible to hit. But it remains a useful first screen to quickly eliminate overpriced properties. If a deal doesn't come close to 1%, look much harder at the numbers before buying.

The 50% Rule

Operating expenses (excluding mortgage) will typically run about 50% of gross rents. So if rent is $2,000/month, expect $1,000/month in operating expenses. The remaining $1,000 goes to debt service and cash flow. This rule helps you quickly estimate NOI without knowing every expense line. It's a rough heuristic — always do a full analysis before buying.

The 70% Rule

More relevant to flips than rentals: pay no more than 70% of After Repair Value (ARV) minus repair costs. For buy-and-hold rental investing, the 1% and 50% rules are more applicable.

Common Mistakes to Avoid

  • Ignoring vacancy. Even great rentals have tenant turnover. Budget for it.
  • Underestimating maintenance. Older properties especially — 1% of value per year is a minimum.
  • Forgetting CapEx. The roof, HVAC, and water heater will all eventually need replacement. Reserve monthly.
  • Using gross rent in your analysis. Always use effective gross income (after vacancy) in your calculations.
  • Buying based on appreciation hope. Model the deal on cash flow alone. Appreciation is a bonus.
  • Not stress-testing. What happens if rates rise and you need to refinance? If rent drops 15%? If the unit sits vacant for 3 months?
  • Ignoring property management costs. Even self-managing investors should model this — you may not want to do it forever.

Frequently Asked Questions

What is a good cap rate for a rental property?

A cap rate between 5% and 10% is generally considered good, though it depends heavily on the market and property type. Urban coastal markets (NYC, LA, SF) typically have lower cap rates of 3–5%, reflecting high land value and strong appreciation. Midwest and Sun Belt markets often offer 6–10%. Anything above 10% warrants investigation — high cap rates can signal high risk, deferred maintenance, or challenging tenant situations.

What is cash-on-cash return and what's a good number?

Cash-on-cash return is your annual pre-tax cash flow divided by the total cash you invested (down payment + closing costs). It measures your return on actual dollars deployed. A CoC return of 6–8% is decent, 8–12% is strong, and 12%+ is excellent. Unlike cap rate, it reflects your financing — meaning leverage can increase or decrease it significantly.

Is negative cash flow ever acceptable?

Sometimes, yes — but only with clear reasoning. Investors in high-appreciation markets (coastal cities, certain fast-growing metros) accept negative cash flow because they expect property values to rise substantially. This is called "alligator" investing (the property eats your cash). It can work, but it requires capital reserves to survive vacancy or unexpected expenses, and you're betting on appreciation that may not materialize.

What is NOI vs. cash flow?

NOI (Net Operating Income) equals effective gross income minus operating expenses — it does not include mortgage payments. Cash flow subtracts mortgage payments from NOI. NOI is financing-agnostic and is used to calculate cap rate and DSCR. Cash flow reflects your actual money in or out each month after all obligations.

How much should I budget for maintenance and repairs?

The standard rule is 1% of the property's value per year for maintenance and repairs — separate from CapEx reserves. So a $300,000 property should have $3,000/year ($250/month) budgeted for maintenance. Older properties, those with deferred maintenance, or single-family homes with more systems may run 1.5–2%. Always investigate the age of major systems (roof, HVAC, plumbing, electrical) before buying.

What is CapEx and why does it matter?

Capital expenditures (CapEx) are large, infrequent expenses like roof replacement ($10,000–$20,000), HVAC systems ($5,000–$15,000), water heaters ($1,000–$3,000), and appliances. Because these costs are irregular and large, savvy investors reserve a set percentage of rent each month so they have cash ready when these items need replacement. Failing to reserve for CapEx is one of the most common ways new landlords get into financial trouble.

Should I include property management fees even if I self-manage?

Yes — for accurate analysis, always model property management fees (typically 8–12% of collected rent) even if you plan to self-manage. There are two reasons: (1) Your time has value. Self-managing is a second job. (2) Plans change. You may want to hire a manager later, move away, or simply burn out on tenant calls at 2am. A deal that only pencils out if you self-manage indefinitely is a riskier deal.

What down payment do I need for a rental property?

Conventional investment property loans typically require 15–25% down, with 20% being the most common threshold for the best rates. FHA loans require only 3.5% down but require owner-occupancy (house-hacking a multi-unit is a common workaround). Some portfolio lenders offer lower down payment options. A higher down payment reduces your mortgage, improves cash flow, and often secures better interest rates, but reduces leverage.

What is the DSCR and why do lenders care?

Debt Service Coverage Ratio = NOI ÷ Annual Debt Service (mortgage payments). It measures whether the property's income covers its debt. Most investment property lenders require a DSCR of at least 1.20–1.25, meaning the property earns 20–25% more than it costs to finance. DSCR loans (which qualify based on property income rather than personal income) have become popular with investors who have complex income situations.

How accurate is the 1% rule today?

The 1% rule is harder to hit than it used to be. With property prices significantly higher than a decade ago and rents not rising proportionally in many markets, many good investments in desirable areas come in at 0.6–0.8%. The rule is best used as a quick screening tool: if you're at 0.4% or below, the cash flow math is very difficult. Use it to filter, not to make final decisions.

Should I pay all cash or finance a rental property?

Financing amplifies returns in both directions. With a $300,000 property generating $15,000/year NOI, paying all cash gives you a 5% return. Put 20% down ($60,000) and if cash flow after mortgage is $4,500/year, your cash-on-cash return is 7.5% — plus you still control $300,000 of real estate with only $60,000. However, leverage also magnifies losses: if the property sits vacant, you're still paying that mortgage. All-cash eliminates risk and maximizes cash flow, but reduces return on equity. Most investors use financing unless they have a specific reason not to.

What vacancy rate should I use in my analysis?

For most residential markets, 5% is a reasonable starting assumption — roughly equivalent to one month vacant every two years. In strong rental markets with low supply (major metros, college towns), 3–4% may be realistic. In softer markets, rural areas, or with higher-priced rentals that attract a smaller tenant pool, use 8–10%. Check local vacancy data from the Census Bureau, your property manager, or local landlord associations. When in doubt, be conservative — it's better to be pleasantly surprised than financially strained.

Glossary of Rental Property Terms

Cap Rate
NOI divided by property value. Measures income yield independent of financing.
Cash-on-Cash Return
Annual cash flow divided by total cash invested. Measures leveraged return on your actual dollars.
NOI
Net Operating Income. Gross income minus operating expenses, before mortgage payments.
IRR
Internal Rate of Return. The annualized return accounting for all cash flows over the holding period, including the sale.
GRM
Gross Rent Multiplier. Purchase price divided by annual gross rent. Lower is better for the buyer.
DSCR
Debt Service Coverage Ratio. NOI divided by annual mortgage payments. Lenders require 1.20+.
CapEx
Capital Expenditures. Large, infrequent property expenses like roof, HVAC, or foundation work.
Cash Flow
Money remaining after all expenses — mortgage, taxes, insurance, maintenance — are paid from rental income.
EGI
Effective Gross Income. Potential gross rent minus vacancy and credit losses.
LTV
Loan-to-Value ratio. Loan amount divided by property value. 80% LTV = 20% down payment.
Amortization
The process of paying off a loan through regular payments that reduce principal over time.
Equity
Property value minus outstanding loan balance. Grows through appreciation and loan paydown.