Rental Property ROI Calculator
Run any rental deal through this and see cash flow, cap rate, cash-on-cash ROI, and total ROI — including appreciation and loan paydown.
How rental property ROI works
Real rental ROI isn't just monthly cash flow. A property pays you back four different ways at once:
- Cash flow — rent minus all expenses, including the mortgage.
- Loan paydown — your tenant chips away at your mortgage principal every month.
- Appreciation — the asset itself gains value over time (3% nationally on average).
- Tax benefits — depreciation can shield much of your cash flow from taxes.
This calculator handles the first three. The fourth depends on your personal tax situation — talk to a CPA who works with real estate investors.
The three numbers that matter most
Cap rate measures the property itself, ignoring how you financed it. It's the unleveraged return — useful for comparing properties apples-to-apples.
Cash-on-cash return measures your actual cash invested vs your actual cash earned each year. This is your real annual return.
Net Operating Income (NOI) is the property's earnings before financing. NOI is what banks and serious investors care about.
A duplex priced at $250,000 rents for $2,200/month. You put 20% down ($50,000), pay $6,000 closing, and $3,500 light rehab.
Operating expenses (annual):
At 7.0% rates, this deal is slightly upside down — you'd pay $92/month to own it. To make it work, you'd need either a price reduction, higher rent, or to put more down.
Rules of thumb investors use
- The 1% Rule — monthly rent should be 1% of the purchase price. Increasingly hard to find in hot markets, but a useful screen.
- The 50% Rule — operating expenses (excluding mortgage) tend to be ~50% of rent over the long run. Useful for quick deal screening.
- Target 8–12% cash-on-cash — below 8% and you're better off in an index fund; above 12% you usually need rehab to extract the value.
- Cap rate floor — most investors won't go below 5% cap rate in any market unless they have a clear plan to push rents.
Frequently asked questions
Should I include the mortgage in my cap rate calculation?
No. Cap rate is intentionally pre-financing — it measures the property's earning power independent of how you bought it. Two investors paying different prices and using different financing for the same building would calculate cap rate the same way.
What if I'm buying all-cash?
If you pay all cash, your cap rate and cash-on-cash return will be nearly identical (the small gap comes from closing costs and rehab being added to total invested). Set down payment to 100% to model this.
How much should I budget for CapEx and maintenance?
Most experienced landlords budget 8–10% of rent for general maintenance and another 5–8% for big-ticket CapEx (roof, HVAC, appliances). Properties built before 1980 should lean toward the higher end. New construction can sometimes get away with 5% total in the first decade.
Why is appreciation conservative at 3%?
The long-run national average of US home price growth is about 3–4% per year after inflation adjustments. Some markets do much better (and some do worse). Use 3% for conservative underwriting; if your market beats it, that's a bonus.
These figures are estimates. Actual rents, expenses, and appreciation vary by location and property type. Always verify with local comps, get an inspection, and consult a CPA for tax matters.