Rental Property Calculator
Analyze rental property investment performance. Calculate monthly income, annual cash flow, cash-on-cash return, cap rate, and gross yield.
Analyze rental property investment performance. Enter property details, financing, rental income, and annual expenses to calculate monthly income, cap rate, cash-on-cash return, and gross yield.
Formula
Monthly Mortgage = Loan × [r(1+r)^n] / [(1+r)^n − 1] | Annual Cash Flow = (Monthly Rent × (1 − Vacancy Rate) − Monthly Expenses) × 12 | Cash-on-Cash Return = Annual Cash Flow ÷ Down Payment × 100 | Cap Rate = NOI ÷ Purchase Price × 100 | Gross Yield = Annual Rent ÷ Purchase Price × 100
Rental property analysis evaluates investment performance across multiple metrics. Cash flow shows actual money returned annually; cap rate measures property profitability independent of financing; gross yield compares rental income to property cost. Together, these metrics assess whether the investment meets your return targets and compares favorably to alternatives.
Worked Example
$300,000 property, 25% down ($75,000), 6.5% mortgage 30-year, $1,500/month rent, 5% vacancy.
Monthly mortgage: $1,687
Effective monthly rent (after 5% vacancy): $1,425
Monthly expenses (tax, insurance, maintenance, management): ~$600
Net monthly income: $1,425 − $1,687 − $600 = −$862 (negative cash flow)
Annual cash flow: −$10,344
Cap rate: 5.4%
Gross yield: 6%
This property shows negative cash flow initially but may build equity through principal repayment and appreciation. The 5.4% cap rate is solid for many markets; the investor relies on long-term appreciation and mortgage paydown.
Frequently Asked Questions
Use this in your workflow
After calculating rental property returns, use the Cap Rate Calculator to compare properties, or the Property Yield Calculator to analyze gross and net yields. Browse all Free Business Calculators.
When to use this calculator
- →Evaluating whether a rental property meets your investment return targets
- →Comparing multiple investment properties on key metrics like cap rate and cash flow
- →Estimating monthly cash flow and annual return on your down payment
- →Building an investment thesis or property analysis for lenders and partners
Common mistakes in rental property analysis
Ignoring or underestimating vacancy rates
Even in strong markets, rental properties sit vacant between tenants or suffer collections issues. A 5% vacancy rate is realistic for most markets. Using 0% vacancy inflates your cash flow projections significantly.
Using only mortgage principal payments in cash flow
Only the interest portion of your mortgage is a real cost. Principal repayment builds equity but is not a cash outflow — do not count it as an expense or your cash flow will be understated.
Forgetting capital expenditure (CapEx) reserves
Roofs, HVAC systems, and major repairs do not recur monthly but occur every 5–15 years. Reserve 1–2% of rental income annually for CapEx. Many investors only budget maintenance, then face cash crunches on major repairs.
Including principal as a cost while claiming it as an investment return
Principal repayment is wealth-building, not cash return. Your cash-on-cash return should reflect only the cash you actually receive annually (rent minus operating costs), not equity buildup.
Not adjusting for management fees or accounting costs
If you self-manage, you may miss accounting, property management software, landlord insurance, and time costs. Most properties generating under $30,000 annual rent justify outsourcing management — budget for it.
Disclaimer
This calculator is for planning purposes only and uses simplified assumptions. Rental property returns depend on many factors including property location, tenant quality, local regulations, market cycles, maintenance requirements, and financing options. This analysis does not account for taxes, depreciation benefits, or capital appreciation. This is not legal, tax, or financial advice. Consult a real estate advisor or tax professional before making investment decisions.
Frequently asked questions
What is cash-on-cash return?
Cash-on-cash return measures the annual cash income from your investment relative to the actual cash invested (down payment). Formula: Cash-on-Cash Return = Annual Cash Flow ÷ Cash Invested × 100. A 10% cash-on-cash return means your initial investment generates 10% in annual cash income.
What is a good cap rate?
Cap rate (capitalization rate) typically ranges from 4% to 10% depending on location, property type, and market conditions. A 6% cap rate is solid in many markets. Higher cap rates indicate higher returns but may signal higher risk. Compare cap rates across properties in the same market.
What does gross yield mean?
Gross yield is annual rental income as a percentage of the property purchase price, before accounting for any expenses. Formula: Gross Yield = (Annual Rental Income ÷ Purchase Price) × 100. A $300,000 property generating $18,000 annual rent has a 6% gross yield.
How is vacancy rate factored in?
Vacancy rate estimates the percentage of time the property sits unoccupied or rent is uncollected. A 5% vacancy rate means you lose 5% of potential rental income. This calculator subtracts vacancy losses from gross rental income to estimate actual rental income.
What costs should I include?
Include mortgage interest (not principal), property tax, insurance, maintenance and repairs, management fees, utilities you pay, and any HOA fees. Do not include principal repayment — that builds equity. For investment decisions, model both conservative and aggressive cost scenarios.