Cap Rate CalculatorRental property math, shown in full

Worksheet 02 · Full analysis

Rental property calculator

A rental property calculator turns price, loan, rent and costs into one year's cash flow and returns. In the example below, a $300,000 house renting for $2,600 a month nets $19,049 a year (a 6.35% cap rate) but only $90 a month after a 7% mortgage.

Cap Rate Calculator editorial teamUpdated 9 sources

Worksheet 02

Analyze a rental property

Year one, before income tax

Purchase

$
%
$
$

Loan

%
years

Income

$
$
%

Operating expenses

$
$
$
$
$
%
%
%
Monthly cash flow$90after the mortgage, before tax
Cash-on-cash1.21%cash flow ÷ cash invested
Cap rate6.35%NOI ÷ price
DSCR1.06×NOI ÷ debt service
Cash needed
$90,000
Loan amount
$225,000
Monthly P&I
$1,497
Gross rent multiplier
9.6
Rent ÷ all-in price
0.85%
Break-even ratio
91.5%
Year-1 loan paydown
$2,286
Cash-on-cash incl. paydown
3.75%
Year-one operating statement
Gross potential income$31,200
Less: Vacancy and credit loss (5.0%)($1,560)
Effective gross income$29,640
Less: Property taxes($3,600)
Less: Insurance($1,500)
Less: Repairs and maintenance (5% of rent)($1,560)
Less: Capital reserves (5% of rent)($1,560)
Less: Property management (8% of collected income)($2,371)
Total operating expenses($10,591)
Net operating income (NOI)$19,049
Less: Debt service (12 × P&I)($17,963)
Annual cash flow before tax$1,086
Where each dollar of gross income goes
  • Vacancy 5%
  • Operating expenses 34%
  • Mortgage 58%
  • Cash flow 3%

Formula. NOI = rent + other income − vacancy − operating expenses. Cash flow = NOI − 12 × monthly principal and interest. Cash-on-cash = cash flow ÷ (down payment + closing costs + repairs). DSCR = NOI ÷ debt service. Break-even ratio = (operating expenses + debt service) ÷ gross income.

How the rental property calculator works

The worksheet builds a one-year operating statement, then subtracts the mortgage to reach cash flow, the same order an underwriter uses.[1]

  1. Gross potential income is twelve months of full rent plus other income.
  2. Vacancy and credit loss come off first, giving effective gross income (the rent you actually collect).
  3. Operating expenses come off next: fixed dollar costs (taxes, insurance, HOA, utilities) and percentage costs (maintenance and reserves as a share of rent, management as a share of collected rent).
  4. What is left is net operating income. Dividing it by the price gives the cap rate.
  5. Debt service, twelve monthly principal-and-interest payments (see the investment property mortgage calculator), comes off NOI to give cash flow before tax.
  6. Cash flow divided by the cash you put in is the cash-on-cash return.[2]
Cash flow=NOI − debt serviceDebt service = 12 × monthly principal and interest. Taxes and insurance are already inside NOI, so they are not counted twice.

Reading the example

The default numbers describe a single-family rental bought with 25% down at 7% for 30 years. The results show why one metric is never enough:

MeasureResultWhat it says
Cap rate6.35%The house earns this on its price before any loan.
Monthly cash flow$90What is left each month after the mortgage.
Cash-on-cash1.21%Cash flow on the $90,000 put in.
DSCR1.06×NOI covers the payment, with little cushion.
Cash-on-cash if bought for cash6.05%With no loan, the cash return is close to the cap rate.

Here the loan's annual payments are 7.98% of the loan amount (its loan constant), more than the 6.35% cap rate (a loan constant is always higher than the interest rate[3]), so borrowing lowers the cash return: each borrowed dollar costs more to carry than the property earns on it. When the cap rate is above the loan constant, leverage raises the cash return instead. Try changing the interest rate or the down payment and watch the cash-on-cash figure move.

Choosing the inputs

Closing costs and repairs

The CFPB puts typical closing costs at 2% to 5% of the purchase price, not counting the down payment.[4] Add any work needed before the first tenant moves in, because that is cash you put into the deal too.

Vacancy

Use the vacancy you expect for this property, not a national average. For context, the U.S. national rental vacancy rate was 7.6% in the third quarter of 2026.[5] Fannie Mae's multifamily underwriting assumes at least 5% of gross potential rent for vacancy, concessions and bad debt.[1] When rent is used to qualify for a mortgage on a 1–4 unit property, Fannie Mae counts 75% of gross rent.[6]

Maintenance, reserves and management

These are the inputs most often left out. Even a house with a new roof will eventually need one, so the capital reserve line spreads that future cost across the years. Leave management in even if you plan to manage yourself; your time has a cost, and the number shows what hiring help would do to the return. For comparison, Fannie Mae's multifamily underwriting uses a management fee of at least 3% of effective gross income.[1]

Check the expenses twiceUnderestimated costs are the most common reason a rental that looked profitable on paper loses money. Use the actual tax bill and an insurance quote, not a seller's estimate.

What is a good return on a rental property?

A good return is one that pays you enough more than a low-risk alternative to justify the work and the risk, not a fixed percentage.

  • Against Treasuries. The 10-year Treasury yield was 4.98% on November 10, 2026.[7] The example's 1.21% cash-on-cash return is below that, before counting loan paydown; the gap has to be made up by paydown, rent growth or appreciation, all of which are uncertain.
  • Against the loan. If the cap rate is below the loan constant, borrowing lowers your cash return (see above).
  • Against the risk. All investments involve some risk,[8] and a rental adds vacancy, repairs and the work of managing it.

For the return over several years, including loan paydown and a sale on your own assumptions, use the investment property calculator.

Other measures in the results

  • Gross rent multiplier: price ÷ gross annual rent. A quick comparison tool, explained on the rental property value calculator.
  • Rent ÷ all-in price: the "1% rule" screen some investors use. $2,600 on $306,000 is 0.85%.
  • Break-even ratio: operating costs plus debt service as a share of gross income. Above 100% means the property cannot carry itself even when fully rented.
  • Year-1 loan paydown: the principal part of the payments. It builds equity but is not cash in hand, so it is shown separately.

To look past year one, with rent growth, a sale and an annualized return, use the investment property calculator. For a monthly view with a stress test, use the rental cash flow calculator. To keep this analysis in Excel or Google Sheets, download it from the rental property spreadsheet page.

Not adviceResults are arithmetic on your inputs. Rental income may not cover the mortgage and other costs, property values can fall, and a rental can be hard to sell quickly.[9] See the disclaimer.

Frequently asked questions

How do you calculate profit on a rental property?

Subtract vacancy and operating expenses from rent to get NOI, then subtract the year's mortgage payments. The remainder is pre-tax cash flow. Divide it by the cash you invested for the cash-on-cash return.

What expenses should a rental property calculator include?

Property taxes, insurance, repairs and maintenance, capital reserves, management, owner-paid utilities, HOA dues and other recurring costs such as lawn care. The mortgage is subtracted separately, after NOI.

Is the mortgage principal an expense?

For cash flow, the whole payment leaves your account, so this calculator subtracts principal and interest. For return purposes the principal builds equity, which is why year-1 paydown is shown as its own line.

What is a good ROI on a rental property?

There is no standard figure. Compare the cash-on-cash return with what a low-risk alternative pays, such as the 10-year Treasury yield (4.98% on November 10, 2026), and with the extra work and risk of owning a rental.

Why is my cash-on-cash return lower than the cap rate?

Because the loan costs more than the property earns. When the mortgage rate is above the cap rate, borrowing reduces the return on your cash.

Sources

  1. 203.01 Underwritten Net Cash Flow (Multifamily Selling and Servicing Guide, Part II, Ch. 2) · Fannie Mae, accessed November 13, 2026
  2. Etter, W. E. Expected Rate of Return: More than Interest (Publication 1145) · Real Estate Center at Texas A&M University, Fall 1996
  3. Etter, W. E. Calculating Mortgage Loans (Publication 923) · Real Estate Center at Texas A&M University, April 1992, reprinted June 1995
  4. Figure out how much you want to spend (Owning a Home) · Consumer Financial Protection Bureau, February 18, 2026
  5. Quarterly Residential Vacancies and Homeownership, Third Quarter 2026 (CB26-161) · U.S. Census Bureau, October 28, 2026
  6. B3-3.8-02, Rental Income from the Subject Property (Selling Guide) · Fannie Mae, September 2, 2026
  7. H.15 Selected Interest Rates (Daily) · Board of Governors of the Federal Reserve System, November 12, 2026
  8. What is Risk? · U.S. Securities and Exchange Commission, Investor.gov, n.d.
  9. Buying an investment property · ASIC Moneysmart, September 29, 2026