What is a good cap rate for a rental property?

Cap rates vary by market. In major metros, 4-5% is typical. In smaller markets or B/C neighborhoods, 6-10% is common. Higher cap rate generally means higher risk or lower-appreciation area.

What is cash-on-cash return in real estate?

Cash-on-cash return measures annual cash flow divided by total cash invested (down payment + closing costs). A 8-12% cash-on-cash return is generally considered strong for residential rentals.

What expenses should I include for a rental property?

Include: mortgage payment, property taxes, insurance, property management (8-12%), maintenance/repairs (1-2% of value per year), vacancy (5-8%), and capital expenditure reserves for major items like roof and HVAC.

What is the 1% rule for rental properties?

The 1% rule states that monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for $2,000/month. It's a quick screening tool, not a substitute for detailed analysis.

Rental Property Calculator

Analyze any rental property investment. See monthly cash flow, cap rate, cash-on-cash return, and net operating income before you buy.

Purchase Price

Down Payment

Interest Rate

Loan Term (years)

yrs

Monthly Rent

Vacancy Rate

Monthly Cash Flow

$274 loss

After mortgage, expenses, and vacancy

Mortgage: $1,597

Management: $167

Taxes: $300

Insurance: $100

Maintenance: $200

Effective Monthly Rent

$2,090

Total Monthly Expenses

$2,364

Annual Cash Flow

-$3,287

Vacancy Loss/mo

$110

How to Use This Rental Property Calculator

This calculator has two tabs to cover the full picture of any rental investment:

Cash Flow Tab

Enter your Purchase Price, Down Payment, Interest Rate, and Loan Term to calculate your mortgage payment. Then add your Monthly Rent and Vacancy Rate. Click "More options" to add property management, taxes, insurance, and maintenance costs. The result shows your true monthly cash flow after all expenses.

Returns & Metrics Tab

This tab focuses on investment performance metrics: Cap Rate (property-level return independent of financing), Cash-on-Cash Return (your actual return on invested capital), and Gross Rent Multiplier (a quick valuation check).

The Formulas Explained

Effective Monthly Rent = Gross Rent × (1 − Vacancy Rate)
NOI = Annual Effective Rent − Annual Operating Expenses
Monthly Cash Flow = Effective Rent − Operating Expenses − Mortgage Payment
Cap Rate = NOI / Purchase Price × 100
Cash-on-Cash = Annual Cash Flow / Down Payment × 100

Operating expenses include property management, taxes, insurance, and maintenance — but NOT the mortgage payment. Cap rate and NOI are calculated pre-financing, which makes them useful for comparing properties regardless of how they're funded.

Example: Single-Family Rental in Phoenix, AZ

Marcus's First Rental Property

Marcus bought a 3BR/2BA home for $300,000 with 20% down in a Phoenix suburb with strong rental demand.

Purchase Price	$300,000
Down Payment (20%)	$60,000
Loan Amount	$240,000 at 7%
Mortgage Payment	$1,597/mo
Monthly Rent	$2,200
Vacancy (5%)	$110/mo loss
Property Mgmt (8%)	$166/mo
Taxes + Insurance	$400/mo
Maintenance Reserve	$200/mo
Monthly Cash Flow	-$273/mo
Cap Rate	5.2%

Marcus is slightly cash-flow negative but accepts this because he's in a high-appreciation market. Many investors in expensive markets accept modest negative cash flow when long-term appreciation potential is strong.

Frequently Asked Questions

A common benchmark is $100-$200+ positive cash flow per month per unit after all expenses including mortgage. Negative cash flow means you're subsidizing the property each month. In expensive markets, some investors accept slight negative cash flow banking on appreciation. Always model the worst case (higher vacancy, higher repairs).

Cap rates vary by market. In major metros (NYC, LA, SF), 3-5% is typical due to high values. In mid-tier markets (Phoenix, Atlanta, Indianapolis), 5-7% is common. In smaller or C-class markets, 8-10%+ is achievable. Higher cap rate = higher return but often higher risk.

Cash-on-cash return = Annual Cash Flow / Total Cash Invested × 100. It measures your actual dollar return on the dollars you put in (down payment + closing costs). A 8-12% cash-on-cash is generally considered strong. It's the most relevant metric for leveraged rental investors.

The 1% rule says monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. It's a quick screening tool — not a substitute for full analysis. In most major US cities today, the 1% rule is very hard to meet.

A common rule is 1-2% of property value per year for maintenance and repairs. On a $300,000 property, budget $3,000-$6,000 annually ($250-$500/month). Older homes, extreme climates, and properties with older systems (HVAC, roof) need more. Don't skip this — it's one of the biggest mistakes new landlords make.