Rental Property Calculator
See whether a rental property actually makes money: cash-on-cash return, cap rate and monthly cash flow from six numbers you already know.
Cash-on-cash return
2.07%
- Monthly mortgage payment
- £1,596.73
- Monthly cash flow
- £103.27
- Annual cash flow
- £1,239.29
- Net operating income (annual)
- £20,400.00
- Cap rate
- 6.8%
- Cash invested (down payment)
- £60,000.00
Cash-on-cash return measures your levered annual yield: pre-tax cash flow after the mortgage, divided by the cash you put in. Compare it with the cap rate to see how much the financing helps or hurts.
How to use this calculator
Enter the purchase price, your planned down payment as a percentage (US lenders typically ask 15–25% for an investment property), the mortgage rate and term, the monthly rent you expect to collect, and your total monthly operating expenses — property tax, landlord insurance, maintenance, property management and a vacancy allowance, but not the mortgage itself. The calculator returns your cash-on-cash return, plus the mortgage payment, monthly and annual cash flow, net operating income and cap rate.
How the calculation works
Net operating income (NOI) is annual rent minus annual operating expenses. The cap rate divides NOI by the purchase price — the unlevered yield, as if you paid all cash. The mortgage payment uses the standard amortisation formula P = L × r / (1 − (1+r)^−n) on the financed portion. Subtracting a year of mortgage payments from NOI gives annual pre-tax cash flow, and dividing that by your down payment gives the cash-on-cash return — the levered yield on the money you actually put in. When the mortgage rate is below the cap rate, leverage lifts your return; when it is above, leverage drags it down.
Worked example
A $300,000 property with 20% down ($60,000) leaves a $240,000 loan. At 7% over 30 years the mortgage payment is $1,596.73 a month. Rent of $2,500 minus $800 of expenses gives $1,700 a month, or $20,400 NOI a year — a 6.8% cap rate. After $19,161 of annual mortgage payments, cash flow is about $1,239 a year ($103 a month). Divided by the $60,000 down payment, that is a 2.07% cash-on-cash return: positive, but thin — at a 7% mortgage rate, leverage is eating most of the 6.8% unlevered yield.
Frequently asked questions
What is a good cash-on-cash return on a rental property?
Most US investors look for somewhere in the 6–10% range, though what counts as "good" depends on the market, how much work the property needs and what the alternatives pay. In expensive coastal markets investors often accept 3–5% and count on appreciation; in cheaper Midwest markets 10%+ is common. A cash-on-cash return below the yield on a risk-free treasury deserves a hard look — you are taking landlord risk for less than the no-risk rate.
What is the difference between cap rate and cash-on-cash return?
Cap rate is the unlevered yield: net operating income divided by the purchase price, as if you bought with all cash. Cash-on-cash return is the levered yield: cash flow after mortgage payments, divided by only the cash you invested. With no mortgage the two are identical. With a mortgage, cash-on-cash return is higher than the cap rate when your borrowing rate is below the cap rate, and lower when it is above — that gap is the effect of leverage.
What expenses should I include for a rental property?
Include everything you pay to operate the property: property tax, landlord insurance, repairs and maintenance (a common rule of thumb is 1% of the property value per year), property management (typically 8–12% of rent if you outsource), HOA dues, any owner-paid utilities, and a vacancy allowance (5–8% of rent is typical). Do not include the mortgage payment — the calculator handles debt separately so that cap rate stays a clean unlevered measure.
What is the 1% rule for rental property?
The 1% rule is a screening shortcut: monthly rent should be at least 1% of the purchase price ($3,000 rent on a $300,000 property). Properties passing it usually cash-flow comfortably; most properties in expensive markets fail it. It is a filter, not an analysis — it ignores taxes, insurance, rates and vacancy, which is exactly what this calculator accounts for. Use the rule to shortlist, then run the real numbers.
Does this calculator include income tax, appreciation or depreciation?
No — the results are pre-tax cash returns from operating the property. Appreciation, mortgage principal paydown, and US tax effects such as depreciation deductions (27.5-year straight-line for residential rentals) can add materially to total return but depend on your bracket and market. Treat cash-on-cash return as the floor: money the property pays you each year, before those extras.
How much down payment do I need for an investment property?
US lenders typically require 15–25% down for a conventional loan on an investment property — more than the 3–5% possible on a primary residence, because default risk is higher. 25% down usually unlocks better rates. Government-backed low-down-payment programs (FHA, VA) generally require you to live in the property, though "house hacking" a 2–4 unit building with an FHA loan while renting the other units is a recognised exception.