Free Rental Property Calculator: Cash Flow, Cap Rate and ROI
Check whether a rental property pays for itself: monthly cash flow, net operating income, cap rate, cash-on-cash return and debt service coverage, with vacancy, repairs, a capital reserve and management built in.
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A rental property only works if the rent covers the mortgage and every cost of owning it, with something left over. This free rental property calculator works out the monthly cash flow, net operating income, cap rate and cash-on-cash return, with vacancy, repairs, a reserve for big replacements and property management included, so the numbers are honest before you buy.
Rental property calculator
Cash flow before income taxes. Mortgage principal you repay builds equity but is not an expense, and depreciation, appreciation and tax benefits are not included. Investment property loans often require a larger down payment and carry higher rates than loans for a home you live in.
Key takeaways
- A $300,000 rental with 20% down, a 7% 30-year mortgage and $2,400 rent has $1,543 of net operating income a month but a $1,596.73 mortgage payment: cash flow is −$53.73 a month.
- Its cap rate is 6.17%, but the cash-on-cash return is −0.98% and the debt service coverage ratio 0.97.
- At $2,800 rent, the same property would bring about $274 a month and a 4.99% cash-on-cash return.
- Budget for vacancy, repairs and big replacements even if the property is in good shape; they are real costs, just not monthly ones.
How the calculator works
- Effective gross income: rent plus other income, minus an allowance for vacancy and unpaid rent.
- Operating expenses: property tax, insurance, HOA dues, utilities you pay, maintenance, a capital expenditure reserve and property management.
- Net operating income (NOI): effective gross income minus operating expenses. The mortgage is not an operating expense.
- Cash flow: NOI minus the mortgage payment (principal and interest).
| Example ($300,000 price, $2,400 rent) | Per month |
|---|---|
| Rent | $2,400.00 |
| Vacancy (5%) | −$120.00 |
| Property tax ($3,600 a year) | −$300.00 |
| Insurance ($1,500 a year) | −$125.00 |
| Maintenance (8% of rent) | −$192.00 |
| Capital reserve (5% of rent) | −$120.00 |
| Net operating income | $1,543.00 |
| Mortgage ($240,000 at 7%, 30 years) | −$1,596.73 |
| Cash flow | −$53.73 |
Rental property metrics explained
| Metric | Formula | What it tells you |
|---|---|---|
| Cap rate | Annual NOI ÷ purchase price | The property's return before financing; useful to compare properties |
| Cash-on-cash return | Annual cash flow ÷ cash invested (down payment + closing costs) | The yearly return on the money you put in |
| Debt service coverage ratio | NOI ÷ mortgage payments | Whether the rent covers the loan; below 1.0 it does not |
| Gross rent multiplier | Price ÷ annual rent | A quick price check; lower means more rent for the money |
| 1% rule | Monthly rent ÷ price | A rough screen: rent of about 1% of the price a month often suggests positive cash flow |
There is no single good cap rate: it depends on the area, the type of property, its condition and interest rates. Compare properties in the same market, and remember that a cap rate ignores your financing, while cash-on-cash return includes it.
Costs that are easy to underestimate
- Vacancy and turnover: empty months, cleaning and advertising between tenants.
- Repairs and replacements: roofs, heating and cooling systems, water heaters and appliances wear out. A reserve spreads these costs over the years.
- Insurance: landlord policies usually cost more than homeowners insurance for the same house.
- Financing: investment property loans often require 15% to 25% down and carry higher rates than loans for a home you live in. See how mortgage rates work.
Taxes on rental income
- Report rent on Schedule E: rental income and expenses such as mortgage interest, property tax, insurance, repairs and management fees go on Schedule E of Form 1040.
- Depreciation: you deduct the cost of a residential rental building, not the land, over 27.5 years with the straight-line method. The depreciation calculator shows the yearly amounts.
- Losses: rental losses are generally passive. If you actively participate, you may deduct up to $25,000 of rental losses against other income; this allowance phases out between $100,000 and $150,000 of modified adjusted gross income.
- Short-term rentals follow different rules; see our guide to Airbnb taxes.
Frequently asked questions
How do you calculate cash flow on a rental property?
Take the rent, subtract vacancy and all operating expenses to get net operating income, then subtract the mortgage payment. What is left is your monthly cash flow before income taxes.
What is the difference between cap rate and cash-on-cash return?
The cap rate compares net operating income with the purchase price and ignores the mortgage. Cash-on-cash return compares the cash flow after the mortgage with the cash you invested.
Is negative cash flow always bad?
It means you pay money into the property every month. Some investors accept it in exchange for expected appreciation and loan paydown, but it adds risk: if rents fall or a big repair comes up, you must cover the gap.
Does the 1% rule still work?
It is a rough screen, not a rule. In many high-cost areas almost no property meets it, so always run the full numbers with your actual rent, taxes, insurance and financing.
Is the mortgage principal an expense?
No. The principal part of your payment builds equity, so it reduces your cash flow but not your profit. For taxes, you deduct the interest, not the principal.
