Rental Property Calculator — Cap Rate & Cash Flow
Analyze rental property returns with cap rate, cash-on-cash return, gross rent multiplier, NOI, and projected 10-year equity. Compare financing scenarios and calculate the 50% and 1% rules.
Quick Presets
Purchase & Financing
Rental Income
Operating Expenses
What Is the Rental Property Calculator — Cap Rate & Cash Flow?
This calculator gives you the complete financial picture of a rental property investment. Beyond simple monthly cash flow, it computes the full suite of real estate metrics that professional investors use: cap rate, cash-on-cash return, gross rent multiplier, gross yield, net yield, NOI, and the quick-screen 1% and 50% rules. A 10-year projection models equity buildup through both mortgage paydown and property appreciation.
- ›Full expense breakdown — property tax, insurance, HOA, maintenance, management fee, vacancy, and capital expenditure reserve all modeled individually.
- ›1% and 50% rule checks — instant pass/fail screens used by experienced investors to quickly filter properties before detailed analysis.
- ›10-year projection — models property value appreciation, equity accumulation through mortgage paydown, and cumulative cash flow to give total return over a hold period.
- ›Presets — Single Family Home, Duplex, Condo, and Multi-family load realistic property configurations for quick comparison.
Formula
Net Operating Income (NOI)
NOI = Gross Rent × (1 − vacancy%) − Operating Expenses
Cap Rate
Cap Rate = NOI / Purchase Price
Cash-on-Cash Return
CoC = Annual Net Cash Flow / Total Cash Invested (down payment + closing)
Gross Rent Multiplier
GRM = Purchase Price / Annual Gross Rent
| Metric | Formula | Target |
|---|---|---|
| Cap Rate | NOI / Price | Above 5%–6% for decent rental markets; varies by market |
| Cash-on-Cash | Net CF / Cash Invested | Above 8%–10% considered strong; compares to alternative investments |
| GRM | Price / Annual Rent | Lower is better; typically 10–15x in most US markets |
| 1% Rule | Rent ≥ 1% × Price? | Quick screen: $200k property should rent for ≥ $2,000/mo |
| 50% Rule | Expenses ≈ 50% of Rent? | Rule of thumb: half of gross rent covers operating costs |
| Gross Yield | Annual Rent / Price | Before expenses; compares to bond or dividend yields |
How to Use
- 1Enter purchase price and financing: Input the purchase price, down payment %, mortgage rate, and loan term (typically 30 years for investment properties).
- 2Enter rental income: Monthly rent at full occupancy. Set vacancy rate to account for periods between tenants (typically 5–8%).
- 3Enter operating expenses: Property tax rate (annual, % of value), insurance (annual dollars), HOA monthly fee, maintenance (% of property value/year), and management fee (% of rent).
- 4Set capital expenditure reserve: CapEx reserve covers major repairs (roof, HVAC, appliances). A common rule is 1–2% of property value per year.
- 5Set appreciation rate: Expected annual property value growth for the 10-year projection. US average is ~3–4%; use local market data.
- 6Click Calculate: View all metrics: NOI, cap rate, cash-on-cash, GRM, monthly cash flow breakdown, rule checks, and 10-year projection.
- 7Compare presets: Switch between Single Family, Duplex, Condo, and Multi-family to understand how property type affects returns.
Example Calculation
Single family home: $350,000 purchase, 20% down, 7% mortgage, $2,200/month rent
Down payment: $70,000 | Loan: $280,000 at 7%, 30yr
Monthly mortgage (P&I): $1,863
Gross rent: $2,200
Vacancy (5%): −$110
Property tax (1.2%/yr): −$350
Insurance: −$120
Maintenance (1%/yr): −$292
Management (8%): −$176
CapEx reserve (1%/yr): −$292
Monthly cash flow: $2,200 − $110 − $350 − $120 − $292 − $176 − $292 − $1,863 = −$1,003
NOI (before mortgage): $8,880/yr | Cap Rate: 8,880/350,000 = 2.54%
Cash-on-Cash: negative (cash flow negative after mortgage)
1% Rule: $2,200 / $350,000 = 0.63% — FAIL (needs $3,500/mo to pass)
What this example teaches
In expensive markets, the 1% rule and positive cash flow are nearly impossible to achieve simultaneously with a standard 20% down mortgage. Many investors in high-cost markets invest for appreciation and equity buildup rather than current cash flow. The cap rate of 2.54% is below the typical 5–6% threshold, but investors in appreciating markets accept lower yields for capital gains potential.
Understanding Rental Property — Cap Rate & Cash Flow
Financial Disclaimer
This calculator is for educational and planning purposes only. It does not constitute financial advice. Consult a qualified financial advisor before making investment or retirement decisions. Tax rules and contribution limits change annually; verify current limits at irs.gov.
Cap Rate vs. Cash-on-Cash Return
These two metrics answer different questions. Cap rate evaluates the property independent of financing — it is NOI divided by purchase price, and it does not care whether you paid cash or took a mortgage. It is useful for comparing properties and markets. Cash-on-cash return, by contrast, measures the return on the actual cash you invested (down payment plus closing costs) relative to the net cash flow after all expenses including the mortgage. It answers: "what return am I getting on my cash?"
- ›Cap rate — market-level metric. Independent of financing. "What does this market think this property is worth per dollar of income?"
- ›Cash-on-cash — investor-level metric. Depends on leverage. Higher LTV often increases CoC but adds risk.
- ›Gross yield — pre-expense cap rate. Useful for very quick screening before getting expense data.
The 1% Rule and 50% Rule — When to Use Them
The 1% rule (monthly rent ≥ 1% of purchase price) and 50% rule (operating expenses ≈ 50% of gross rent) are screening heuristics, not investment decisions. In most major US metros with prices above $400,000, the 1% rule is nearly impossible to achieve. The rules are calibrated to 2000s-era Midwest and Sun Belt markets. Use them to quickly reject overpriced properties but not to approve marginal ones.
The Real Sources of Rental Property Return
Total return from a rental property comes from four sources:
- ›Cash flow — monthly rent minus all expenses including mortgage. Often negative in high-cost markets.
- ›Appreciation — property value increase over time. The primary return driver in coastal markets.
- ›Principal paydown — each mortgage payment builds equity. At 7% on a 30-year loan, early payments are ~70% interest; this shifts over time.
- ›Tax benefits — depreciation deduction ($27.5-year straight-line for residential), mortgage interest deduction, and 1031 exchange deferral.
Frequently Asked Questions
What is a good cap rate for a rental property?
- ›Primary coastal markets: 3–4% (appreciation-driven investing)
- ›Secondary markets (Atlanta, Phoenix, Dallas): 5–7%
- ›Tertiary/Midwest markets: 7–10% (cash-flow-driven)
- ›General rule: cap rate should exceed the risk-free rate (10yr Treasury) by 2%+
A 3% cap rate with 5% annual appreciation can still outperform a 7% cap rate with 1% appreciation over a 10-year hold.
What is the 1% rule and does it still work?
- ›$200,000 property needs $2,000/month rent to pass — achievable in many US markets
- ›$600,000 property needs $6,000/month rent — rare in most markets
- ›Useful for screening affordable markets quickly
- ›In high-cost markets, substitute the 0.5–0.7% rule as the threshold
What expenses should I include in a rental property analysis?
- ›Mortgage P&I — the largest fixed cost
- ›Property tax — typically 0.5–2.5% of value annually, varies by state
- ›Insurance — landlord policy, typically $100–$200/month
- ›Property management — 8–12% of collected rent
- ›Vacancy — 5–8% allowance for periods between tenants
- ›Maintenance — 1% of value/year for ongoing repairs
- ›CapEx reserve — 1–2% for major replacements (roof, HVAC, appliances)
How do I calculate cash-on-cash return?
CoC = (Annual Net Cash Flow) / (Down Payment + Closing Costs)
- ›Measures actual return on cash deployed, accounting for leverage
- ›Higher leverage (smaller down payment) typically increases CoC — but increases risk
- ›Unlike cap rate, CoC depends on your specific financing terms
- ›Compare CoC to dividend yields and bond yields for context
What is a capital expenditure reserve and why is it important?
- ›Roof replacement: $10,000–$20,000 every 20–25 years
- ›HVAC system: $5,000–$12,000 every 15–20 years
- ›Water heater: $1,000–$2,000 every 10–15 years
- ›Rule of thumb: reserve 1% of property value per year for CapEx
- ›Older properties need higher reserves; newer properties may need less initially
How does leverage affect rental property returns?
$300,000 property, 5% appreciation ($15,000 gain):
- ›Cash purchase: $15,000 / $300,000 = 5% return on equity
- ›20% down ($60,000): $15,000 / $60,000 = 25% return on equity
- ›10% down ($30,000): $15,000 / $30,000 = 50% return on equity
- ›But: 10% property decline wipes out 33% of equity at 20% down, all equity at 10% down