What is a good cap rate for rental property?

A good cap rate varies by location and property type but generally falls between 5% and 10%. In high-demand urban areas, cap rates may be lower (4-6%) due to higher property values, while in smaller markets they can be higher (8-12%). A higher cap rate indicates higher potential return but may also reflect higher risk.

What is cash-on-cash return?

Cash-on-cash return measures the annual pre-tax cash flow relative to the total cash invested (down payment plus closing costs). For example, if you invest $60,000 as a down payment and earn $6,000 in annual cash flow after all expenses and mortgage payments, your cash-on-cash return is 10%.

How do you calculate NOI for a rental property?

Net Operating Income (NOI) is calculated as gross rental income minus vacancy losses and operating expenses. Operating expenses include property management, maintenance, insurance, and property taxes, but do NOT include mortgage payments. NOI is used to calculate cap rate and assess property value.

What vacancy rate should I use?

A vacancy rate of 5-10% is commonly used for residential rental properties. In strong rental markets with high demand, 5% may be appropriate. In areas with higher turnover or seasonal demand, 8-10% or higher may be more realistic. Check local market data for the most accurate estimate.

Free Rental Property Calculator — ROI & Cash Flow

Rental Property Calculator

Analyze any rental property investment with cap rate, cash-on-cash return, monthly cash flow, and ROI.

Purchase Price ($)

Down Payment (%)

Monthly Rent Income ($)

Vacancy Rate (%)

Monthly Operating Expenses ($)

Insurance, taxes, management, repairs

Mortgage Rate (% p.a.)

Loan Term (Years)

Monthly Cash Flow

Cap Rate 0% Cash-on-Cash Return 0% Annual ROI 0% Net Operating Income $0/yr Monthly Mortgage $0 Effective Gross Income $0/yr

How to Evaluate a Rental Property Investment

Investing in rental property can generate passive income and long-term wealth, but success depends on carefully analyzing the numbers before you buy. This calculator helps you evaluate key financial metrics that real estate investors use to compare properties and make informed decisions.

Key Metrics Explained

Net Operating Income (NOI) is your annual rental income after subtracting vacancy losses and operating expenses, but before mortgage payments. Cap rate divides NOI by the purchase price to give you a property's return independent of financing. Cash-on-cash return measures the annual cash flow relative to the cash you actually invested (your down payment), showing the return on your out-of-pocket investment.

Monthly Cash Flow

Monthly cash flow is what remains after all expenses and mortgage payments are deducted from your rental income. Positive cash flow means the property pays for itself and puts money in your pocket each month. A general rule of thumb is to aim for at least $100-200 per unit in monthly cash flow, though this varies by market.

Remember to account for vacancy, which represents the percentage of time your property may sit empty between tenants. A vacancy rate of 5-10% is standard for most residential properties. Operating expenses should include property management fees, insurance, property taxes, and a maintenance reserve.

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for decisions specific to your situation.

Rental Property Calculator

How to Evaluate a Rental Property Investment

Key Metrics Explained

Monthly Cash Flow

Frequently Asked Questions

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