Rental Property ROI Calculator
Evaluate rental property investments with cash-on-cash return, cap rate, monthly cash flow, NOI, the 1% rule, and a 5-year projection.
| Year | Property Value | Equity | Annual Cash Flow | Cumulative Cash Flow | Total ROI |
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Rental Property ROI Calculator
The SmarterSources Rental Property ROI Calculator helps real estate investors evaluate potential rental property investments. Enter your purchase details, financing terms, expected rental income, and operating expenses to instantly see cash flow, cash-on-cash return, cap rate, NOI, and a 5-year projection with equity buildup and property appreciation.
How Cash-on-Cash Return Is Calculated
Cash-on-cash return measures the annual pre-tax cash flow relative to the total cash you invested upfront. The formula is: Cash-on-Cash Return = Annual Cash Flow / Total Cash Invested. Total cash invested includes your down payment, closing costs, and any repair or rehab costs. This metric tells you how hard your actual cash is working, independent of leverage.
Understanding Cap Rate
Capitalization rate (cap rate) is calculated as NOI / Purchase Price. It measures the property's return as if you paid all cash, removing financing from the equation. Cap rate allows you to compare properties on an apples-to-apples basis regardless of how they are financed. Higher cap rates generally indicate higher returns but may also signal higher risk.
Net Operating Income (NOI)
NOI is gross rental income minus all operating expenses (taxes, insurance, maintenance, management, HOA, utilities, and vacancy). NOI excludes mortgage payments and capital expenditures. It represents the income the property generates from operations alone and is the foundation for cap rate calculations.
The 1% Rule and Gross Rent Multiplier
The 1% rule is a quick screening tool: if monthly rent is at least 1% of the purchase price, the property is more likely to cash flow positively. The gross rent multiplier (GRM) is the inverse view — purchase price divided by annual gross rent. A lower GRM suggests the property may offer better value relative to its income.
5-Year Projection
The projection table estimates equity buildup through mortgage amortization, property value growth through appreciation, and cumulative cash flow over five years. Total ROI combines all three sources of return relative to your initial cash investment. Actual results will vary based on market conditions, rent changes, and operating expenses.
Frequently Asked Questions
What is cash-on-cash return in real estate?
Cash-on-cash return is the annual pre-tax cash flow divided by total cash invested. It measures how much return you earn on the actual dollars you put into the deal, including down payment, closing costs, and rehab costs.
What is a good cap rate for rental property?
Cap rates vary by market. Stable urban areas typically see 4-6%, suburban markets 6-8%, and rural or value-add markets 8-12%. A higher cap rate indicates higher potential return but often comes with more risk or management intensity.
What is the 1% rule?
The 1% rule suggests that monthly rent should equal at least 1% of the purchase price. For example, a $200,000 property should rent for $2,000 or more. It is a rough screening guideline, not a substitute for full analysis.
What expenses should I include?
Include property taxes, insurance, maintenance (5-15% of rent), vacancy (5-10%), property management (8-12% if applicable), HOA fees, and landlord-paid utilities. Mortgage payments are separate from operating expenses but essential for cash flow.
Is my data safe?
Yes. This calculator runs entirely in your browser. No data is sent to any server and nothing is stored.