# Rental Property ROI Calculator

Calculate rental property cash flow, cash-on-cash ROI, and cap rate. Analyze profitability after mortgage, expenses, and vacancy.

## What this calculates

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.

## Inputs

- **Purchase Price** ($) — min 0 — The purchase price of the rental property.
- **Down Payment** (%) — min 0, max 100 — Down payment as a percentage (investment properties typically require 20-25%).
- **Mortgage Interest Rate** (%) — min 0, max 20 — The annual mortgage interest rate.
- **Monthly Rent** ($) — min 0 — The expected monthly rental income.
- **Monthly Expenses** ($) — min 0 — Monthly expenses (taxes, insurance, maintenance, management, etc.).
- **Vacancy Rate** (%) — min 0, max 50 — Expected vacancy rate (time without tenants).

## Outputs

- **Monthly Cash Flow** — formatted as currency — Monthly income after mortgage, expenses, and vacancy.
- **Annual Cash Flow** — formatted as currency — Total annual cash flow from the property.
- **Cash-on-Cash ROI** — formatted as percentage — Annual cash flow divided by total cash invested.
- **Cap Rate** — formatted as percentage — NOI divided by purchase price.
- **Total Monthly Costs** — formatted as currency — Mortgage payment plus monthly expenses.

## Details

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.

## Frequently Asked Questions

**Q: What is a good cash-on-cash return for rental property?**

A: Most real estate investors target a cash-on-cash return of 8-12% or higher. Returns below 5% may not justify the effort and risk compared to passive investments like index funds. In expensive markets, 4-6% may be acceptable if you also expect strong appreciation. Always compare against alternative investments and your own cost of capital.

**Q: What is the 1% rule in real estate?**

A: The 1% rule states that a rental property's monthly rent should be at least 1% of the purchase price. A $300,000 property should rent for at least $3,000 per month. This is a quick screening tool, not a definitive analysis. Many profitable properties do not meet this threshold, especially in high-appreciation markets. Always run a full cash flow analysis.

**Q: How do I calculate NOI for a rental property?**

A: Net Operating Income (NOI) = Gross Rental Income - Vacancy Losses - Operating Expenses. Operating expenses include property taxes, insurance, maintenance, management fees, utilities (if paid by owner), and reserves for capital expenditures. NOI does not include mortgage payments or income taxes. It represents the property's income before financing costs.

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Source: https://vastcalc.com/calculators/finance/rental-property
Category: Finance
Last updated: 2026-04-21