How this calculator works
This rental property calculator estimates whether an investment property generates positive cash flow and how key return metrics compare. It answers: Does this rental pay for itself after mortgage, taxes, insurance, vacancy, and upkeep?
It computes:
- Monthly mortgage payment (P&I) from purchase price, down payment, interest rate, and loan term.
- Gross monthly income from rent plus other income (parking, laundry, storage, etc.).
- Total monthly expenses across mortgage, property taxes, insurance, HOA, management, maintenance, vacancy allowance, and other costs you enter.
- Monthly and annual cash flow — effective income minus all expenses.
- Cash-on-cash return — annual pre-tax cash flow divided by total cash invested (down payment plus closing costs).
- Cap rate — net operating income (NOI) divided by purchase price, excluding debt service.
- Gross rent multiplier (GRM) — purchase price divided by annual gross rent.
- Five-year projection with optional 3% annual rent growth while holding other inputs constant unless tied to rent.
Closing costs default to 3% of purchase price when you use the default setting. Vacancy defaults to 8% of gross rent; maintenance defaults to 1% of property value per year—common planning shortcuts, not market-specific guarantees.
This is not tax or investment advice. Depreciation, appreciation, cost segregation, and after-tax effects are not modeled. Pre-tax cash flow can look modest while after-tax returns improve—this tool does not capture that.
See the loan payment calculator for mortgage math on any loan amount, and the rent vs. buy calculator for primary-residence decisions—not investment property economics.
What affects the result
Several inputs move cash flow and return metrics in opposite directions.
- Purchase price and rent — Higher price with flat rent lowers cap rate and cash-on-cash return. GRM rises when rent is low relative to price—a quick screening metric, not a full picture.
- Down payment and interest rate — Larger down payments reduce debt service but increase cash invested in the denominator of cash-on-cash return. Higher rates raise the mortgage line item materially on leveraged deals.
- Vacancy rate — A higher allowance reduces effective income. Use 5–10% based on market turnover; seasonal or student markets may need more.
- Maintenance reserve — Default 1% of value per year funds repairs and capital items over time. Older properties, roofs, and HVAC may need 1.5–2% in planning scenarios.
- Property management — Even if you self-manage today, modeling 8–10% of rent reserves budget for your time or future hiring and makes property comparisons consistent.
- Closing costs — Included in total cash invested for cash-on-cash return. Default 3% is rough; actual acquisition costs vary by state, loan type, and points.
Cap rate ignores your loan—it compares properties on an unlevered basis. Cash-on-cash return reflects financing. A property can show a decent cap rate but negative cash flow with heavy leverage—or positive cash flow with thin equity returns if cash invested is large.
The five-year table optionally grows rent at 3% annually while holding mortgage, taxes, insurance, and flat maintenance inputs constant (except management tied to rent). It does not model appreciation, expense inflation, or refinance events.
Real-world examples
Example 1: Break-even duplex. Purchase $300,000 with $60,000 down (20%) at 7% over 30 years. Rent $2,500/mo with 8% vacancy, $300 monthly taxes, $150 insurance, and 1% maintenance. Monthly cash flow near zero may still build equity through principal paydown—not shown in cash flow alone. Evaluate whether that equity buildup meets your return hurdle.
Example 2: Strong cash-on-cash. $200,000 property, $50,000 down, rent $1,800/mo, modest taxes and insurance. Positive $200+/mo cash flow can produce double-digit cash-on-cash return on ~$56,000 invested including 3% closing costs—if vacancy and maintenance assumptions hold.
Example 3: Management fee impact. 10% management on $2,000 rent adds $200/mo to expenses—often the difference between positive and negative cash flow in tight markets. Run with and without management to stress-test self-management risk.
Example 4: Leverage vs. cap rate. A 6% cap rate property with 80% financing at 7% may show lower cash-on-cash than a 5% cap rate deal with 50% down—financing structure matters as much as headline cap rate.
Example 5: Rent growth projection. Turning on 3% rent growth in the five-year table shows how modest annual increases improve cash flow when expenses stay flat. Useful for long-hold planning, not a forecast of market rents or expense trends.
Common mistakes
Using gross rent without vacancy. Scheduled rent is not collected rent. Always model vacancy, credit loss, and turnover costs—even in hot markets.
Ignoring maintenance and capital expenditures. Setting maintenance to 0% understates long-run costs. Roofs, HVAC, plumbing, and appliances are lumpy but real; the 1% rule is a starting point, not a ceiling for older stock.
Comparing cap rate to cash-on-cash without context. Cap rate is unlevered; cash-on-cash includes your loan. Compare like with like across deals and financing structures.
Skipping closing costs in cash invested. Cash-on-cash return should include acquisition costs beyond the down payment—inspections, title, lender fees, and prepaid items.
Expecting tax benefits in pre-tax cash flow. Depreciation can improve after-tax returns even when pre-tax cash flow is modest or slightly negative—this tool does not model schedules or passive loss rules.
Treating GRM or cap rate as sufficient due diligence. Screening metrics save time but do not replace expense verification, inspection, rent comps, and local landlord regulations.
When to use this calculator
Use it when evaluating a listing, comparing two rental candidates, or stress-testing rent and expense assumptions before making an offer. It fits single-family rentals, small multis, and condo investments when you can estimate income and operating costs.
Pair with the home affordability calculator if you are also buying a primary residence and need total housing budget context, and the ROI calculator for generic return math on other investments.
For primary-residence vs. renting decisions—where you live, not invest—use the rent vs. buy calculator instead. This tool focuses on investment property economics.
Skip this calculator for short-term Airbnb modeling with highly variable occupancy, commercial leases with complex escalations, or flip scenarios driven by renovation budget and sale price rather than ongoing rent.
Related calculators
- Loan and mortgage payment calculator — principal and interest on any loan amount, rate, and term.
- Home affordability calculator — how much house your income and debts support for a primary residence.
- Rent vs. buy calculator — compare net costs of renting versus owning a home you will live in.
- ROI calculator — return on investment for generic gain and cost inputs outside rental-specific metrics.
Related guides
- Rent vs. buy explained — how primary-residence rent vs. buy differs from rental investing analysis.
- How to buy a home — financing and closing context when you also own investment property.
- How much house can I afford? — income and DTI rules that may limit how much leverage you can add on rentals.
FAQ
What is cash-on-cash return?
Cash-on-cash return is annual pre-tax cash flow divided by total cash invested (typically down payment plus closing costs). It measures how much cash income you earn each year relative to the equity you put in—not total property value.
What is cap rate and how is it different from cash-on-cash return?
Cap rate is net operating income (effective rent minus operating expenses, excluding mortgage payments) divided by purchase price. It ignores financing, so it helps compare properties on an unlevered basis. Cash-on-cash return includes debt service and reflects your actual out-of-pocket investment.
What vacancy rate should I use?
Many investors use 5–10% depending on market and property type. Higher turnover neighborhoods or seasonal rentals may need a higher allowance. This calculator defaults to 8% as a middle-ground estimate.
Does this calculator include depreciation or tax benefits?
No. Depreciation, mortgage interest deductions, cost segregation, and other tax effects are not modeled. After-tax returns can differ significantly from the pre-tax cash flow shown here.
What is a good cash flow for a rental property?
Rules of thumb vary by market. Some investors target at least $100–$200 per door per month after expenses, or a cash-on-cash return of 8–12%+. High-price markets may accept lower monthly cash flow if appreciation is expected—but that is not captured here.
Should I include property management even if I self-manage?
Including a management fee (often 8–10% of rent) even when self-managing can reserve budget for your time or future hiring and makes comparisons across properties more consistent.
How is gross rent multiplier (GRM) used?
GRM is purchase price divided by annual gross rent. Lower GRM can indicate relatively higher rent for the price, but it ignores expenses, financing, and vacancy. Use it as a quick screening metric alongside cap rate and cash flow.
Does the five-year table include property appreciation?
No. The projection optionally grows rent at 3% per year while holding other expenses flat (except management fees tied to rent). Mortgage payment, taxes, insurance, and maintenance inputs stay constant unless you change them.