Rental Property ROI Calculator
Analyze any rental property investment with our free ROI calculator. Enter the purchase price, down payment, mortgage rate, rent, and expenses to calculate monthly cash flow, annual returns, cash-on-cash ROI, and cap rate.
Evaluating a rental property investment requires looking at several metrics beyond just the purchase price and rent. The most important are monthly cash flow (income after all expenses and mortgage), cash-on-cash return (annual cash flow divided by your cash invested), and cap rate (Net Operating Income divided by property value). A positive monthly cash flow means the property pays for itself.
The 1% rule is a quick screening tool: a property's monthly rent should be at least 1% of the purchase price to be worth analyzing further. For a $350,000 property, that means at least $3,500 in monthly rent. While many markets do not meet this threshold, it helps quickly filter out overpriced properties. The 50% rule estimates that about 50% of gross rent will go to non-mortgage expenses.
Vacancy rate is often underestimated by new investors. Even in hot rental markets, expect 5-10% vacancy due to tenant turnover, maintenance between tenants, and occasional extended vacancies. Budget for at least 8% vacancy when analyzing properties. Also factor in a 10-15% management fee if you plan to hire a property manager, and 1-2% of property value annually for maintenance and capital expenditure reserves.