CalcPro

Rental Property Calculator

Analyze a rental: NOI, cap rate and cash-on-cash from rent, expenses and financing.

How it works

A landlord evaluates a rental property by asking: How much will this property earn me each month, and how does that return compare to my upfront investment? The Rental Property Calculator answers both questions by computing your net operating income (the property's annual earnings before debt), your cap rate (a standardized yield metric), and your monthly cash-on-cash return (the actual dollars in your pocket after the mortgage is paid).

You input the purchase price, the cash you're putting down plus closing costs, your mortgage's interest rate and amortization period, the monthly rent you'll collect, and your operating expenses as a percentage of rent. The calculator derives your first-year NOI, translates it into a cap rate, computes your monthly mortgage payment, and subtracts that payment from monthly net rent to show your cash flow. This combination reveals whether a rental is truly profitable for your situation—not just whether it generates income in theory.

The formula

Cap Rate = (Annual Rent − Annual Operating Expenses) ÷ Purchase Price × 100%

Monthly Cash Flow = Monthly NOI − Monthly Mortgage Payment

Worked example

You're considering a single-family rental listed at $300,000. You plan to put down 25% ($75,000) and pay $8,000 in closing costs, so your total cash invested is $83,000. You've locked in a 6.5% mortgage rate on a 30-year loan. The property rents for $1,800 per month, and your operating expenses (property tax, insurance, maintenance, vacancy, and management) total 40% of rent.

First, calculate monthly net operating income:

Monthly rent: $1,800

Operating expenses: $1,800 × 0.40 = $720

Monthly NOI: $1,800 − $720 = $1,080

Annual NOI: $1,080 × 12 = $12,960

Next, derive the cap rate:

Cap rate: ($12,960 ÷ $300,000) × 100% = 4.32%

Now calculate your mortgage payment using the standard amortization formula. With a loan amount of $225,000 (purchase price minus down payment), 6.5% annual rate, and 360 months:

Monthly mortgage payment ≈ $1,422

Finally, your monthly cash-on-cash:

Monthly cash flow: $1,080 − $1,422 = −$342

Annual cash flow: −$342 × 12 = −$4,104

Cash-on-cash return: (−$4,104 ÷ $83,000) × 100% = −4.94%

This property is cash-flow negative—you lose $342 every month. While the cap rate (4.32%) might seem reasonable, the mortgage payment exceeds your net rent, so you're subsidizing the property from other income. This is a common pitfall: a property with a decent cap rate can still be a poor investment if the mortgage burden is too heavy relative to the rent collected.

Common mistakes

Forgetting closing costs. Many landlords count only the down payment as their cash invested and omit title insurance, appraisal fees, and legal costs. This inflates their perceived cash-on-cash return. Always add closing costs to your down payment figure.

Underestimating operating expenses. New landlords often assume expenses are 20–25% of rent, then discover that property tax, insurance, and maintenance reserves alone consume 35–40%. Check local tax rates and insurance quotes before entering your expense percentage; a low estimate will make an unprofitable rental look attractive.

Ignoring the mortgage term. A 15-year mortgage on the same property and rate will produce a higher monthly payment and likely negative cash flow, while a 30-year term may produce modest positive cash flow. Always model the actual loan term you're pursuing.

Frequently asked questions

What is NOI and why does it matter for rentals?

Net Operating Income (NOI) is annual rental income minus operating expenses—taxes, insurance, maintenance, vacancy allowance, and property management. It excludes debt service (mortgage payments), so it shows the property's pure earning power independent of how you financed it. A higher NOI relative to purchase price signals a stronger rental asset.

How is cap rate different from cash-on-cash return?

Cap rate divides NOI by the purchase price and is a market-wide benchmark. Cash-on-cash return divides annual cash flow (NOI minus mortgage payment) by your actual cash invested (down payment plus closing costs) and reflects your personal return on the money you put in. A property with a 5% cap rate might yield 8% cash-on-cash if you put down 20% and get a favorable mortgage rate.

Should I use gross rent or account for vacancies?

Always account for vacancy. Operating expenses as a percentage of rent typically include a 5–10% vacancy buffer, reflecting realistic periods between tenants. Using gross rent without this adjustment overstates your NOI and can lead to poor investment decisions.

What monthly expenses should I include?

Include property tax, insurance, maintenance reserves (usually 8–12% of rent), HOA fees if applicable, and property management costs (8–12% of rent if hiring a manager). Do NOT include the mortgage principal or interest here—those are debt service, calculated separately and subtracted from NOI to get cash flow.

Why does mortgage term matter for my rental returns?

A longer mortgage term (e.g., 30 years) lowers your monthly payment but increases total interest paid; a shorter term (e.g., 15 years) raises monthly payment but saves interest. The monthly payment directly affects your cash-on-cash return, so the term shapes how much cash you actually pocket each month after the bank is paid.

What counts as 'cash invested'?

Cash invested is your down payment plus closing costs (title insurance, appraisal, origination fees, legal fees, inspections). It is the total out-of-pocket money required to acquire and close on the property. This is the denominator for cash-on-cash return, so it must be accurate.

Related calculators

Real Estate Investment CalculatorProject a property's future resale value and total appreciation gain over your holding period.Mortgage CalculatorEstimate your full monthly mortgage payment including principal, interest, property tax and insurance.ROI CalculatorReturn on investment as a percentage, with an annualized figure.House Affordability CalculatorThe maximum home price you can afford from income, debts and a debt-to-income limit.