What is a good ROI for rental property?

Aim for 8-12% annual ROI. If you're getting 10% or more, you're doing well. Properties in growing areas might show 6-8% initially but gain value over time. Fixer-uppers in good locations can hit 15%+ if you buy right and improve efficiently. Remember: consistent 10% beats risky 20%.

How do you calculate total ROI including appreciation and mortgage paydown?

Your rental property makes money three ways: 1) Monthly cash flow ($400/month = $4,800/year), 2) Property value increase (3% annual appreciation on $300K = $9,000), 3) Tenants paying down your mortgage (~$3,000/year). Total gain: $16,800 ÷ $60,000 invested = 28% total ROI.

What's the difference between cap rate and cash-on-cash return?

Cap rate ignores your mortgage and shows what you'd earn if you paid cash ($18,000 profit ÷ $300,000 price = 6% cap rate). Cash-on-cash shows your actual return with a loan ($6,000 profit ÷ $60,000 down payment = 10%). With a mortgage, your cash-on-cash is usually higher because you're using leverage.

What expenses should I include when calculating ROI?

Include everything: property taxes, insurance, property management (even if you self-manage, budget 8-10%), maintenance (1-2% of property value yearly), vacancy (assume 5-10% even with good tenants), utilities you pay, HOA fees, and your mortgage payment. Don't forget one-time costs: down payment, closing costs (2-4%), and any immediate repairs.

How much profit should a rental property make per month?

Target $200-400+ positive cash flow after ALL expenses including mortgage. The "1% rule" is a quick test: monthly rent should be at least 1% of purchase price (a $250,000 property should rent for $2,500+). This rule is harder to hit in expensive markets but works well in most areas.

What is considered a good cap rate?

6-8% is typical for most markets. Lower cap rates (4-6%) usually mean stable, expensive areas like major cities where you're betting on appreciation. Higher cap rates (8-10%+) mean cheaper areas with higher risks but better immediate cash flow. Compare properties in the same neighborhood, not across different cities.

How do I calculate cash-on-cash return?

Take your annual profit after all expenses ($8,400) and divide by the total cash you put in ($65,000 down payment + $3,000 closing costs = $68,000). That's $8,400 ÷ $68,000 = 12.4% cash-on-cash return. This shows how hard your actual money is working for you.

Should I include property appreciation in my ROI calculation?

Yes, but track it separately. Your monthly cash flow is guaranteed income. Appreciation is a bonus that compounds over time. Example: 3% appreciation on a $300,000 property adds $9,000 in year one, $9,270 in year two (3% of $309,000). After 10 years, that's roughly $103,000 in equity gain you can access by selling or refinancing.

What is the 50% rule for rental properties?

A quick estimate: your operating expenses (everything except mortgage) will eat about 50% of your rent. If rent is $2,000/month, expect $1,000 for taxes, insurance, maintenance, vacancy, etc., leaving $1,000 for your mortgage payment and profit. This is a screening tool - always calculate actual expenses before buying.

How long does it take to see ROI on a rental property?

You see returns immediately through monthly cash flow. Breaking even on your down payment typically takes 5-10 years. But most investors don't wait - they refinance after 2-5 years to pull out equity and buy another property, or they sell to capture appreciation. Think of rentals as a long-term wealth builder, not a get-rich-quick scheme.

Free Rental Property ROI Calculator

Rental property ROI calculator

Calculate cash flow, cap rate, and return on investment for your rental property.

Purchase Price

Down Payment20% ($60,000)

Monthly Rent

Annual Property Tax

Annual Insurance

Interest Rate7.00%

Loan Term30 years

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Smart Estimates

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

Annual Appreciation Rate

Click to add rehab costs, additional income, and other expenses

Estimated monthly cash flow

-$297

Cash-on-Cash Return-5.16%

Cap Rate5.20%

Total ROI7.88%

Annual Cash Flow-$3,561

Initial Investment

Down Payment$60,000

Closing Costs$9,000

Total Investment$69,000

Monthly Income

Rental Income$2,000

Vacancy Loss (5%)-$100

Effective Income$1,900

Monthly Expenses

Mortgage Payment$1,597

Property Tax$250

Insurance$100

Maintenance$250

Total Expenses$2,197

Financing Details

Loan Amount$240,000

Interest Rate7.00%

Loan Term30 years

Monthly Payment$1,597

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.

Other calculators for you

More free tools to help you manage your rental property

Prorated Rent Calculator

Calculate prorated rent for mid-month move-ins and move-outs in seconds.

Simple Rental ROI Calculator

Quick 10-second gut check for rental property investments. Calculate ROI with 4 simple inputs.

Automate your rental property accounting with Rentlab

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