What is cap rate and what is a good cap rate?

Cap rate = NOI ÷ Property Price × 100. It measures a property's income relative to its value ignoring financing. In 2025, a 5–8% cap rate is generally considered good for residential rentals, though this varies by market. High-demand markets often trade at 3–5%.

What is cash-on-cash return?

Cash-on-cash return = Annual Cash Flow ÷ Total Cash Invested × 100. It measures the actual cash yield on your invested capital (down payment + closing costs). A 6–12% cash-on-cash return is generally considered solid for a leveraged rental.

What is the 1% rule for rental properties?

The 1% rule says the monthly rent should be at least 1% of the purchase price. A $300,000 property should rent for at least $3,000/month. It is a quick screening tool — properties that pass are more likely to generate positive cash flow.

What is DSCR (Debt Service Coverage Ratio)?

DSCR = NOI ÷ Annual Debt Service. A DSCR above 1.25 means the property generates 25% more income than needed to cover the mortgage. Lenders typically require DSCR of 1.2–1.25 for investment property loans.

What expenses should I include for a rental property?

Include mortgage (P&I), property tax, insurance, vacancy (typically 5–10%), property management (8–12% of rent), maintenance/repairs (1% of value annually), HOA, utilities paid by landlord, and capital expenditure reserves.

Rental Property Calculator

Calculate rental property cash flow, cap rate, and cash-on-cash return. Full expense breakdown with NOI, DSCR, GRM, and the 1% rule check for investors.

Purchase Price ?

Down Payment (%) ?

Interest Rate (%) ?

Monthly Rent ?

Property Tax (Annual) ?

Insurance (Annual) ?

Monthly Cash Flow

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Cap Rate —

Cash-on-Cash Return —

Net Operating Income (Annual) —

Extended More scenarios, charts & detailed breakdown ▾

Purchase Price

Down Payment (%)

Interest Rate (%)

Monthly Rent

Vacancy Rate (%)

Property Management (%)

Maintenance (% of value)

Property Tax (Annual)

Insurance (Annual)

Monthly Cash Flow

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Gross Annual Rent —

Total Annual Expenses —

NOI —

Professional Full parameters & maximum detail ▾

Purchase Price

Down Payment (%)

Interest Rate (%)

Loan Term (Years)

Monthly Gross Rent

Vacancy Rate (%)

Property Management (%)

Maintenance (% of value/yr)

Property Tax (Annual)

Insurance (Annual)

HOA (Monthly)

Utilities (Monthly, if paid by owner)

Monthly Summary

Monthly Mortgage (P&I) —

Total Monthly Expenses —

Monthly Cash Flow —

Investment Metrics

Net Operating Income (Annual) —

Cap Rate —

Cash-on-Cash Return —

Gross Rent Multiplier (GRM) —

DSCR (Debt Service Coverage) —

Rules & Thresholds

1% Rule Check —

Break-Even Occupancy Rate —

How to Use This Calculator

Enter the Purchase Price and Down Payment % (typically 20–25% for investment properties).
Enter the Interest Rate and Monthly Rent.
Add Property Tax and Insurance for a complete picture.
Review Monthly Cash Flow, Cap Rate, and Cash-on-Cash Return.
Use Professional mode for full expense breakdown including vacancy, management, and maintenance.

Formula

NOI = Effective Gross Income − Operating Expenses (excluding mortgage)

Cap Rate = NOI ÷ Purchase Price × 100

Cash Flow = NOI − Annual Debt Service (mortgage)

Cash-on-Cash = Annual Cash Flow ÷ Cash Invested × 100

Example

Example: $300K property, 25% down, 7% rate, $2,200/mo rent.

Mortgage: $1,497/mo | Expenses: ~$800/mo | Effective Rent: $2,090
Monthly Cash Flow: −$207 (slightly negative — common at 7% rates)
Cap Rate: 5.2% | Cash-on-Cash: −1.1%

Frequently Asked Questions

Cap rate = NOI ÷ Property Price × 100. It measures a property's income relative to its value ignoring financing. In 2025, a 5–8% cap rate is generally considered good for residential rentals, though this varies by market. High-demand markets often trade at 3–5%.
Cash-on-cash return = Annual Cash Flow ÷ Total Cash Invested × 100. It measures the actual cash yield on your invested capital (down payment + closing costs). A 6–12% cash-on-cash return is generally considered solid for a leveraged rental.
The 1% rule says the monthly rent should be at least 1% of the purchase price. A $300,000 property should rent for at least $3,000/month. It is a quick screening tool — properties that pass are more likely to generate positive cash flow.
DSCR = NOI ÷ Annual Debt Service. A DSCR above 1.25 means the property generates 25% more income than needed to cover the mortgage. Lenders typically require DSCR of 1.2–1.25 for investment property loans.
Include mortgage (P&I), property tax, insurance, vacancy (typically 5–10%), property management (8–12% of rent), maintenance/repairs (1% of value annually), HOA, utilities paid by landlord, and capital expenditure reserves.

Related Calculators

Sources & References (5) ▾

IRS Publication 527 — Residential Rental Property — Internal Revenue Service
National Association of Realtors — Rental Property Data — National Association of Realtors
CFPB — Landlord and Tenant Resources — Consumer Financial Protection Bureau
HUD — Fair Housing and Rental Property — U.S. Department of Housing and Urban Development
IRS Publication 946 — How to Depreciate Property — Internal Revenue Service