DDanfio

Rental Property Calculator

A rental property has two returns that get confused with each other. One is the property: the rent it collects less the costs of running it, divided by what it cost. The other is your money: the cash left after the mortgage, divided by the cash you put in. Leverage raises the second and leaves the first alone.

$

Investment property loans usually want 20% or more.

$

The share of the year with no tenant or no payment.

$
$

As a percent of gross rent. Repairs, turnover and replacements.

As a percent of gross rent. Set it to 0 if you manage it yourself.

$
$

Lawn care, accounting, licences, pest control.

$

Counted as part of the cash invested.

Land cannot be depreciated, so it is excluded from the basis.

The rate the depreciation deduction saves you.

Results update as you type. Nothing leaves your device.

Monthly cash flow

$127.85

$18,600 of net operating income less $17,066 of mortgage payments, measured against $81,000 of cash in.

Cap rate
6.2%
Cash-on-cash
1.89%
Debt service coverage
1.09×
One percent rule
0.83%

Where each rent dollar goes

  • Vacancy and collection loss$1,500
  • Operating costs$9,900
  • Mortgage payments$17,066
  • Cash flow$1,534

On a leveraged property the mortgage is usually the largest slice, which is why a small move in the rate changes the answer more than any other input.

The year in numbers

LineAmount
Gross rent at $2,500 a month$30,000.00
Less vacancy and collection loss−$1,500.00
Rent actually collected$28,500.00
Less property tax, insurance, maintenance, management and HOA−$9,900.00
Net operating income$18,600.00
Less mortgage payments−$17,065.80
Cash flow$1,534.20
Plus principal repaid by the tenant$2,514.84
Total year-one return before tax$4,049.04
Depreciation deduction$8,727.27
Tax saved by that deduction$2,094.54

Principal repaid is a return even though it stays in the building: the tenant paid it, and it belongs to you. Depreciation is a paper deduction, so it delivers cash only through the tax return.

What other mortgage rates would do

RateMonthly paymentAnnual cash flowCoverageCash-on-cash
5%$1,208$4,1061.28×5.07%
5.5%$1,278$3,2701.21×4.04%
6%$1,349$2,4121.15×2.98%
6.5%$1,422$1,5341.09×1.89%
7%$1,497$6371.04×0.79%
7.5%$1,573-$2790.99×-0.34%

Everything except the financing is held constant, which is the only way to see how much of the return is bought with debt.

Gross rent multiplier is 10, and the depreciation deduction is $8,727 a year over the 27.5-year residential schedule. Appreciation, rent growth, capital works and the tax on a future sale are all outside this model.

This calculator reports both, along with the coverage ratio a lender looks at, the one percent rule landlords still quote, and the depreciation deduction that makes a rental different from any other investment. Every figure comes from the rent, the running costs and the loan you enter, so the answer is a description of a specific deal rather than a market average.

How this rental property calculator works

Net operating income is the property, not the deal

Start with the rent for a full year, subtract the vacancy and collection loss you expect, and you have the money the property actually collects. Then subtract the costs of running it: property tax, landlord insurance, maintenance and repairs, management, HOA dues and everything else the owner pays before the mortgage.

What is left is net operating income. It ignores the loan on purpose, which is what makes it comparable between two properties and between two buyers. Divide it by the purchase price and you have the cap rate: the return the property would produce for an all-cash buyer.

Leverage and cash-on-cash

Subtract the mortgage payments from net operating income and you have cash flow. Divide that by the cash invested, which is the down payment plus the closing costs and any reserves you had to hold, and you have the cash-on-cash return.

If the cap rate is higher than the mortgage rate, borrowing raises the cash-on-cash return, and if it is lower, borrowing lowers it while adding risk. That is why the rate table on this page moves the financing and holds everything else still: it shows how much of the return is bought with debt rather than earned by the property.

Coverage, the one percent rule and depreciation

Lenders divide net operating income by the annual mortgage payments to get debt service coverage, and most want 1.2 or better. Below that, a vacancy or a repair arrives as a missed payment rather than a bad month.

The one percent rule is the older shorthand: monthly rent should be at least one percent of the purchase price. It was written when interest rates were far higher than they are now and it fails in most expensive markets, but it is still the fastest filter for a listing.

Depreciation is the deduction that only property gets. A residential rental is written down over 27.5 years on the value of the building rather than the land, and the deduction reduces taxable income even in a year when nothing was spent. It is not cash, and it is recaptured when the property is sold, which is why it is shown here next to the cash figures rather than added to them.

Worked examples

Each example below was run through the calculator on this page when the site was built, so the numbers match what you see when you enter the same inputs.

A $300,000 unit rented at $2,500 a month

Purchase price
$300,000.00
Down payment
25%
Mortgage rate
6.5%
Loan term
30 years
Monthly rent
$2,500.00
Vacancy and collection loss
5%
Property tax
$3,600.00
Landlord insurance
$1,500.00
Maintenance and repairs
8%
Property management
8%
HOA dues
$0.00
Other monthly costs
$0.00
Closing costs paid
$6,000.00
Land share of the price
20%
Marginal tax rate
24%

Monthly cash flow

$127.85

$18,600 of net operating income less $17,066 of mortgage payments, measured against $81,000 of cash in.

Cap rate
6.2%
Cash-on-cash
1.89%
Debt service coverage
1.09×
One percent rule
0.83%

The property yields a 6.2% cap rate, but the mortgage at 6.5% takes most of it: cash flow is about $128 a month and coverage is 1.09, below the 1.2 a lender usually wants.

The same unit bought for cash

Purchase price
$300,000.00
Down payment
100%
Mortgage rate
6.5%
Loan term
30 years
Monthly rent
$2,500.00
Vacancy and collection loss
5%
Property tax
$3,600.00
Landlord insurance
$1,500.00
Maintenance and repairs
8%
Property management
8%
HOA dues
$0.00
Other monthly costs
$0.00
Closing costs paid
$0.00
Land share of the price
20%
Marginal tax rate
24%

Monthly cash flow

$1,550.00

$18,600 of net operating income less $0 of mortgage payments, measured against $300,000 of cash in.

Cap rate
6.2%
Cash-on-cash
6.2%
Debt service coverage
0×
One percent rule
0.83%

With no mortgage the cash-on-cash return is the cap rate of 6.2% and the cash flow is $1,550 a month: less return, far less fragility.

A $420,000 unit that only rents for $2,500

Purchase price
$420,000.00
Down payment
25%
Mortgage rate
6.5%
Loan term
30 years
Monthly rent
$2,500.00
Vacancy and collection loss
5%
Property tax
$5,000.00
Landlord insurance
$1,800.00
Maintenance and repairs
8%
Property management
8%
HOA dues
$0.00
Other monthly costs
$0.00
Closing costs paid
$8,000.00
Land share of the price
20%
Marginal tax rate
24%

Monthly cash flow

-$582.68

$16,900 of net operating income less $23,892 of mortgage payments, measured against $113,000 of cash in.

Cap rate
4.02%
Cash-on-cash
-6.19%
Debt service coverage
0.71×
One percent rule
0.6%

The cap rate falls to about 4% and the deal loses roughly $580 a month. That is a wager on appreciation and rent growth rather than a rental business, and it needs a funded reserve.

Frequently asked questions

What is a good cap rate?

It depends on what else the money could do and on how much growth the market expects. Residential rentals commonly trade between 4% and 8%, with expensive coastal markets at the low end and markets with weak growth or higher risk at the high end. A cap rate below the mortgage rate means borrowing reduces the return rather than magnifying it.

Why is cash-on-cash different from the cap rate?

The cap rate measures the property without debt; cash-on-cash measures your equity after the loan. When the cap rate is above the mortgage rate, leverage multiplies the return on your cash, and when it is below, leverage divides it. The second case is common at current rates, which is why one property can be a fine all-cash purchase and a poor financed one.

Does the one percent rule still work?

It is a filter rather than a rule. Monthly rent of one percent of the price was a useful test when rates were higher and prices lower relative to rents; today it fails in most large metros. Use it to discard obvious mismatches quickly, then price the deal properly, which is what the rest of this page does.

How much should I budget for vacancy and maintenance?

Vacancy of five to eight percent of gross rent is a common starting point for a stable long-term let, and maintenance and repairs of eight to twelve percent, rising with the age of the building. Both are inputs here so a worse year can be tested: the point of the calculator is to see what happens when they are not what you hoped.

How does depreciation work on a rental?

Residential rental property is depreciated straight-line over 27.5 years on the value of the building, so the land share of the price is excluded. The deduction reduces taxable income whether or not anything was spent, which is why a rental can be profitable after tax while showing a book loss. When the property is sold, that depreciation is generally recaptured at its own rate, so it is a deferral rather than a gift.

What is left out of this calculator?

Appreciation, rent growth, the timing of large capital works, the tax on sale and depreciation recapture, the passive activity rules that limit losses for higher-income owners, insurance claims, eviction costs and any rent control or licensing rules in your city. It also assumes the rent is collected for the occupancy entered, which is the assumption worth testing first.

Assumptions and sources

  • Method: net operating income is the rent collected after vacancy less operating costs; the cap rate is net operating income over price; cash-on-cash is cash flow over the cash invested; debt service coverage is net operating income over the mortgage payments.
  • Depreciation follows the 27.5-year straight-line schedule for residential rental property described in IRS Publication 527, applied to the building value once the land share is removed.
  • Rent, vacancy, maintenance, management and financing are inputs rather than market averages, because they vary by property, market and rate. Appreciation, rent growth and the tax on a future sale sit outside the model. This is not investment or tax advice.

Last reviewed 2026-09-14. This page is an estimate tool, not financial, tax or legal advice.Read the full disclaimer.

Related tools

Airbnb Profit CalculatorLoans & MortgagesWork out what a short-term rental earns after the platform fee, the lodging tax, the cleaning costs and the fixed costs of the property, with a break-even occupancy.Open calculator →Property Tax CalculatorLoans & MortgagesTurn a market value into a property tax bill through the assessment ratio, exemptions and the mill rate, and see what a reassessment or another county would cost.Open calculator →Closing Cost CalculatorLoans & MortgagesAdd up lender fees, points, title, appraisal, recording and escrow prepaids, then see the total as a share of the price and the cash you bring to closing.Open calculator →Mortgage CalculatorLoans & MortgagesFree mortgage calculator with property tax, insurance, HOA and PMI. See your monthly payment, total interest and a full amortization schedule instantly.Open calculator →Rental Property CalculatorNet operating income, cap rate, cash-on-cash return, debt coverage, the one percent rule and depreciation, from the rent, the costs and the mortgage.Open calculator →