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Rental Property ROI Calculator

Find a long-term rental's cap rate, cash-on-cash return, monthly cash flow, and total return over your holding period, with financing handled correctly.

$

What you pay for the property.

%

Percent paid upfront. Investment loans often require 20% to 25%.

%

Annual mortgage rate. Investment property rates run higher than for a primary home.

years

Length of the mortgage.

%

Upfront purchase costs, as a percent of price. Added to your cash invested.

$

One-time rehab or make-ready cost. Added to your cash invested.

$

Expected monthly rent at full occupancy.

%

Share of the year the unit sits empty.

%

Annual property tax as a percent of price.

$

Annual landlord insurance premium.

%

Annual maintenance reserve as a percent of property value.

%

Management fee as a percent of collected rent. Use 0 if you self-manage.

$

HOA dues, if any.

%

Expected yearly change in property value. Drives the total return, so keep it realistic.

years

How long you plan to own it, for the total-return figures.

%

Agent commission and closing costs at sale, as a percent of the sale price.

Share
Xfin

Cash-on-cash return

-6.87%

First-year pre-tax cash flow divided by the cash you put in.

Cap rate
4.06%
Net operating income
$14,223.60
Monthly cash flow
-$561.12
Annual cash flow
-$6,733.44
Total cash invested
$98,000.00
Total profit over holding period
$2,638.61
Total return
2.69%
Annualized return
0.53%
Cumulative cash flow and equity

Assumptions

  • Gross rent is your monthly rent times 12. Effective gross income (EGI) is that gross rent minus a vacancy allowance, the share of the year you assume the unit sits empty.
  • Operating expenses are property tax (a percent of the purchase price), landlord insurance (a fixed amount), a maintenance reserve (a percent of the purchase price), property management (a percent of the rent collected after vacancy), and HOA. Management at 0 percent means you self-manage. These expenses are held constant over the holding period, not grown for inflation.
  • Net operating income (NOI) is EGI minus operating expenses, before the mortgage. Debt service is not an operating expense by the standard definition, so it is not in NOI.
  • Cap rate is NOI divided by the purchase price, so it is a property-level return that is independent of how you finance the deal.
  • Annual cash flow is NOI minus the annual mortgage payment (principal and interest), and monthly cash flow is that divided by 12. Cash flow can be negative, which at current rates often happens when the mortgage costs more than the property earns after expenses. Cash-on-cash return is the first-year cash flow divided by your total cash invested (down payment, closing costs, and upfront repairs), so it depends on financing; it is shown as not applicable when no cash is invested.
  • Total profit over the holding period is your cumulative cash flow plus the equity recovered at sale, minus your cash invested. For this, the first-year cash flow is held constant in nominal terms each year, and equity at sale is the appreciated value minus selling costs (a percent of the sale price) minus the remaining loan balance. Total return is that profit as a percent of cash invested, and the annualized return spreads it over the hold as (1 + total return) raised to the power of (1 divided by the years), minus 1.
  • The mortgage rate is fixed for the loan term, all figures are in nominal dollars, and each result is rounded to the nearest cent.
  • Not modeled: income taxes and the depreciation tax shelter, capital-gains tax on a sale, variable or adjustable rates, capital expenditures beyond the maintenance reserve, and any growth in rent, expenses, or vacancy over time.
  • Results are estimates; rent, vacancy, expenses, and appreciation all vary in the real world. This is an estimate for educational purposes only, not financial, legal, or tax advice. Consult a qualified professional for guidance specific to your situation.

How it works

A rental’s return is measured at three levels, and keeping them separate is the whole point. Each answers a different question.

Net operating income (NOI) is the property’s income after operating expenses, but before the mortgage:

NOI = effective gross income − operating expenses

  • Effective gross income (EGI) is the annual rent minus a vacancy allowance.
  • Operating expenses are property tax, insurance, a maintenance reserve, property management (a percent of the rent actually collected), and HOA. Debt service is deliberately not here. By the standard definition, NOI describes how the property performs no matter who owns it or how they paid for it, so the loan is left out.

Cap rate turns NOI into a property-level return:

cap rate = NOI ÷ purchase price

Because NOI excludes the mortgage, the cap rate is independent of financing. It is the yardstick for comparing one building to another.

Cash-on-cash return is your return as the investor who used a loan:

cash-on-cash = annual pre-tax cash flow ÷ total cash invested

where annual cash flow = NOI − annual debt service, and cash invested = down payment + closing costs

  • upfront repairs. This figure does depend on financing, because both the cash flow (after the mortgage) and the cash invested (your down payment) move with your loan terms.

Total return over the holding period adds the two sources of return that cash-on-cash ignores, loan paydown and appreciation:

total profit = cumulative cash flow + equity at sale − cash invested

Equity at sale = appreciated value − selling costs − remaining loan balance. The remaining balance comes from the same amortization engine the mortgage calculator uses, so the loan paydown is exact. Cash flow is held constant in nominal terms over the hold; taxes and depreciation are not modeled.

Cap rate vs cash-on-cash, plainly

Two investors buy the identical building at the same price. They face the same NOI, so they see the same cap rate. One pays all cash; the other borrows 75%. Their cash-on-cash returns are completely different, because one carries a mortgage and the other does not. Cap rate is about the property. Cash-on-cash is about your deal on that property. You need both: a great building bought with bad financing is still a bad investment, and the cap rate alone will not tell you that.

Worked example

$350,000 property, 25% down, 7% over 30 years, 3% closing costs, $2,200 monthly rent, 5% vacancy, 1.1% property tax, $1,500 insurance, 1% maintenance, 8% management, 3% appreciation, held 5 years, 6% selling costs:

The income and NOI

  • Gross rent = $2,200 × 12 = $26,400; minus 5% vacancy ($1,320) gives EGI of $25,080.
  • Operating expenses = $3,850 tax + $1,500 insurance + $3,500 maintenance + $2,006.40 management (8% of EGI) = $10,856.40.
  • NOI = $25,080 − $10,856.40 = $14,223.60 (no mortgage in this line).
  • Cap rate = $14,223.60 ÷ $350,000 = 4.06%.

The cash flow and cash-on-cash

  • Annual debt service = the payment on a $262,500 loan at 7% over 30 years, $1,746.42/month × 12 = $20,957.04.
  • Annual cash flow = $14,223.60 − $20,957.04 = −$6,733.44. The property is cash-flow negative, because at 7% the mortgage costs more than the property earns.
  • Cash invested = $87,500 down + $10,500 closing = $98,000.
  • Cash-on-cash = −$6,733.44 ÷ $98,000 = −6.87%.

Notice the split: NOI is positive (the operation makes money), but cash-on-cash is negative (the financing is expensive). That is exactly the information the two numbers are meant to separate.

The total return

  • Appreciated value = $350,000 × 1.03^5 = $405,745.93; minus 6% selling costs ($24,344.76) minus the $247,095.36 loan balance after 5 years = equity at sale of $134,305.81.
  • Cumulative cash flow over 5 years = −$6,733.44 × 5 = −$33,667.20.
  • Total profit = −$33,667.20 + $134,305.81 − $98,000 = $2,638.61, a 2.69% total return, about 0.53% annualized.

So a property that loses money each year still ends slightly ahead over five years, returning +2.69%, because loan paydown and appreciation more than offset the negative cash flow. Cash-on-cash alone would have hidden that, which is why the total-return view is shown alongside it.

What this does not model

Taxes and depreciation are excluded, so the real after-tax return for many investors is different (often better in the early years, because depreciation shelters income). Cash flow is held flat in nominal terms rather than grown with rent inflation. Appreciation is an assumption you supply, and it drives most of the total return, so treat the total-return figures as a scenario, not a forecast.

Sources

Frequently asked questions

What is the difference between cap rate and cash-on-cash return?
Cap rate is the property's return ignoring your loan: NOI divided by price. Cash-on-cash is your return as an investor: the cash flow left after the mortgage, divided by the cash you actually put in. Two people can buy the same property at the same cap rate and get very different cash-on-cash returns depending on their financing.
Why does NOI not include the mortgage payment?
By the standard definition, NOI measures the property's operating performance, which is the same no matter who owns it or how they finance it. The mortgage is a financing choice, not an operating cost, so it is left out of NOI and brought in only for cash flow and cash-on-cash.
Why is total return higher than cash-on-cash?
Cash-on-cash counts only the first-year cash in your pocket. Total return also counts the equity you build from paying down the loan and from appreciation, which is where most of a leveraged rental's return usually comes from over time.

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Last reviewed June 2026. For education, not financial advice.