Rental Property ROI Calculator
Calculate cash flow, cap rate, and return on investment for your rental property.
We've calculated common expenses based on your purchase price. Click "Edit" to customize.
Closing Costs
$9,000
Annual Maintenance & Repairs
$3,000
Vacancy Rate
5%
Annual Appreciation Rate
3%
Click to add rehab costs, additional income, and other expenses
Estimated monthly cash flow
How to calculate rental property ROI
Return on investment tells you what a rental property actually pays you back for the cash you put into it. The confusing part is that there is no single ROI number. A rental earns money in three separate ways, and each one has its own formula. Understanding which number answers which question is most of the work.
The three formulas that matter
Start with net operating income (NOI). That is your rent after vacancy, minus every operating expense, but before the mortgage. NOI is the foundation for everything below.
Cap rate
net operating income ÷ purchase price
Answers: how good is this property, ignoring how I financed it?
Cash-on-cash return
annual cash flow ÷ total cash invested
Answers: how hard is the money I actually handed over working?
Total ROI
(cash flow + appreciation + principal paydown) ÷ total cash invested
Answers: what did my net worth do this year because of this property?
Cap rate lets you compare two properties on the same street without the distortion of different loans. Cash-on-cash is the one most first-time landlords care about, because it reflects leverage. Total ROI is the honest long-run picture, and it is almost always the largest of the three, because two of its components do not show up in your bank account each month.
A worked example: a $280,000 duplex
Both units rent for $1,650. You put 25% down on a 30-year loan at 6.5%. Here is the whole calculation, start to finish.
Step 1: what you actually spent
Step 2: income after vacancy
Step 3: operating expenses
Step 4: the mortgage, and the three answers
Cap rate
$22,426 ÷ $280,000
= 8.0%
Cash-on-cash return
$6,498 ÷ $83,400
= 7.8%
Total ROI
($6,498 + $8,400 appreciation + $2,347 principal) ÷ $83,400
= 20.7%
Notice the gap between 7.8% and 20.7%. The cash-on-cash number is what you can spend. The total ROI includes $8,400 of assumed appreciation (3% of the purchase price) and $2,347 your tenants paid off your loan balance in year one. Both are real, and neither one buys groceries. When someone quotes a 20% return on a rental, ask which of these three numbers they mean.
What counts as a good rental property ROI in 2026
With mortgage rates where they are, the old advice to hold out for 12% cash-on-cash has quietly stopped matching reality in most markets. A realistic read today:
A high cap rate is not automatically a better deal. Cheap markets carry higher vacancy, slower appreciation, and tenants more exposed to economic shocks. Compare properties within the same neighborhood, never across cities. And a deal that only works if rents rise is a bet on the market, not an investment in a property.
Five mistakes that make your ROI look better than it is
1. Assuming the property is never empty
Twelve months of rent is a fantasy figure. One turnover a year with three weeks of vacancy is roughly 6%. Budget it even if your current tenant has been there for years, because the calculation should survive them leaving.
2. Confusing maintenance with capital expenses
Fixing a leaking tap is maintenance. Replacing a roof, a furnace, or a water heater is a capital expense, and those arrive whether you saved for them or not. A roof lasts 25 years and costs $12,000, which is $480 a year you owe yourself starting now. Landlords who skip this line report great returns for eight years and then take one very bad year.
3. Pricing your own labor at zero
Self-managing does not make management free, it makes it unpaid. Put 8% to 10% in the expense column anyway. If the deal only works because you are doing the work for nothing, it is a job, not a return, and you will find that out the first time you want to take two weeks off.
4. Forgetting the cash you spent to get in
Cash-on-cash divides by every dollar you handed over, not just the down payment. Closing costs, inspection, and the repairs you made before the first tenant all belong in the denominator. In the example above they add $13,400, which drags the return from 9.3% down to 7.8%.
5. Counting appreciation as income
Appreciation is real, but you cannot access it without selling or refinancing, and it is the one input in the whole model you are purely guessing at. Track it, and keep it in a separate column from the money that actually arrives each month.
What to do when the return comes out negative
At current rates this happens often, and it is not automatically a reason to walk away. Run the same property at a larger down payment first. Moving from 20% to 30% down on the example above cuts the annual mortgage cost by roughly $3,200 and turns a thin deal into a comfortable one, at the price of tying up more cash. That trade shows up immediately in the two numbers: cash flow improves, cash-on-cash often gets worse, because you increased the denominator.
If the deal still does not clear after that, the honest options are a lower offer, a different property, or an explicit decision that you are buying for appreciation and are prepared to fund the shortfall out of income for several years. That last one is a legitimate strategy. It is only dangerous when it happens by accident because vacancy and capital expenses were left out of the model.
Checking your numbers with a free rental property calculator
Working through the arithmetic by hand once is worth doing, because it shows you which inputs actually move the answer. After that, the return on investment calculator at the top of this page runs all three formulas at once and lets you change one assumption at a time. Raise the vacancy rate to 10% and watch what happens to cash flow. That is usually more informative than the headline number.
If you are screening several listings quickly, the simple rental ROI calculator gets you a first-pass answer from four inputs. To model income and expenses in more detail before committing, use the rental income calculator. And once a tenant is moving in partway through a month, the prorated rent calculator handles the first payment.
One last thing worth saying plainly: the ROI you calculate before buying is a forecast, and forecasts drift. The number that matters is the one you can produce from your actual records twelve months in, with the real vacancy you had and the boiler you did not plan for. Rentlab tracks that for you automatically so the comparison is there when you want it.
Frequently Asked Questions
Common questions about using this calculator
Understanding Your Results
Key metrics to evaluate your rental property investment potential
Cash-on-Cash Return
Measures annual pre-tax cash flow compared to your initial cash investment. A good target is 8-12% for rental properties. Track your rental income automatically with Rentlab.
Cap Rate
Shows the rate of return based on net operating income. Helps compare properties regardless of financing. Explore more rental property calculators to analyze your investment.
Monthly Cash Flow
Your monthly profit after all expenses and mortgage payments. Positive cash flow is essential for sustainable investing. Use our prorated rent calculator for mid-month tenant changes.
Total ROI
Combines cash flow, appreciation, and equity buildup for a comprehensive view of your investment performance. Screening several properties at once? The simple rental ROI calculator gives you a first-pass answer from four inputs.
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