The Rental Property Calculator analyzes a rental property investment by turning rent, operating expenses, purchase price, and financing into net operating income, cap rate, cash flow, and cash-on-cash return. Enter those inputs, and the Rental Property Calculator returns each metric with the arithmetic shown so income return and cash return stay distinct.
Primary-home rent-versus-buy questions belong on a different page. This tool is for investor underwriting: what the property earns after operating costs, what yield that implies on value, and what cash remains after debt service relative to cash invested.
*These results are estimates for information only, not financial, tax, or investment advice. Vacancy, repairs, taxes, and financing terms change outcomes; confirm local costs and tax treatment with professionals.*
Analyze a rental property investment
The Rental Property Calculator analyzes a rental property by separating operating performance from financing. Cash flow after the mortgage answers what hits the bank account; NOI and cap rate answer what the property earns before debt, which is how many buyers compare deals on equal footing.
Start with scheduled rent, subtract vacancy and operating expenses (taxes, insurance, management, maintenance, utilities paid by the owner), and the remainder is NOI. Subtract annual mortgage payments from NOI to get cash flow before income tax. Divide cash flow by total cash invested to get cash-on-cash return. The Rental Property Calculator walks that chain so a strong cap rate is never confused with strong cash-on-cash when the loan is large.
Leverage can raise cash-on-cash when the property's yield exceeds the cost of debt, and it can erase cash flow when debt service exceeds NOI. State loan terms beside every cash-on-cash figure.
Calculate the net operating income
The Rental Property Calculator calculates net operating income as annual effective rent minus operating expenses, excluding mortgage principal and interest entirely from that step. NOI measures the property's operating profit before debt service and before income tax on the owner.
The formula is NOI = annual rent - operating expenses (not mortgage). Example: gross rent of $24,000 per year, operating expenses of $12,000, and NOI of $12,000. Vacancy should reduce effective rent before this step; if 5% vacancy is expected on $24,000 scheduled rent, effective rent is $22,800 and expenses then come off that lower base.
Mortgage payments are not operating expenses. Including them inside NOI mixes financing with property operations and breaks comparison with unlevered cap rates. The Rental Property Calculator keeps debt service out of NOI and applies it later for cash flow.
Calculate the cap rate
The Rental Property Calculator calculates the capitalization rate by dividing NOI by the property's stated market or purchase value. Cap rate states the unlevered operating yield: how much net operating income that property produces for each dollar of that value.
The formula is cap rate = NOI / property value. On NOI of $12,000 and value of $200,000, cap rate = 12,000 / 200,000 = 0.06, or 6.0%. A higher cap rate means more income per dollar of price at the same NOI definition; a lower cap rate means the buyer pays more for each dollar of NOI.
Cap rate ignores the loan. Two investors can see the same 6% cap rate and very different cash-on-cash returns after different down payments and rates. The Rental Property Calculator reports cap rate beside cash-on-cash so both views remain available.
Calculate the cash-on-cash return
The Rental Property Calculator calculates cash-on-cash return as annual cash flow divided by total cash invested at purchase. Cash-on-cash answers what the investor earned in cash this year on every dollar of cash actually put into the deal at closing.
Annual cash flow = NOI - annual mortgage payments. Cash-on-cash = annual cash flow / total cash invested. Example: NOI $12,000, annual mortgage payments $9,000, cash flow $3,000; cash invested $50,000 (down payment plus closing costs counted as cash in); cash-on-cash = 3,000 / 50,000 = 0.06, or 6.0%. If cash flow is negative, cash-on-cash is negative and the property requires annual cash in.
Total cash invested should include down payment and purchase closing costs the investor paid. Omitting closing costs inflates cash-on-cash. The Rental Property Calculator uses the invested-cash figure entered for that reason.
Vacancy and capital expenditures deserve explicit treatment. A 5% vacancy allowance on $24,000 scheduled rent removes $1,200 before NOI. A roof or HVAC replacement is usually a capital cost, not a routine operating expense; putting large capital items into annual operating expenses can understate NOI and cap rate for that year while still being real cash the investor spent. State whether the run is a stabilized operating year or a year that includes heavy capital work.
Frequently asked questions
What is NOI on a rental property?
NOI is net operating income: annual rent minus operating expenses, excluding the mortgage. The Rental Property Calculator computes NOI before debt service. On $24,000 rent and $12,000 expenses, NOI is $12,000 when vacancy is already reflected in rent.
How is cap rate calculated?
Cap rate is NOI divided by property value. The Rental Property Calculator reports it as a percent. NOI of $12,000 on a $200,000 property is a 6% cap rate.
How is cash-on-cash return calculated?
Cash-on-cash return is annual cash flow divided by total cash invested. The Rental Property Calculator derives cash flow as NOI minus annual mortgage payments. Cash flow of $3,000 on $50,000 invested is a 6% cash-on-cash return.
Why can cap rate and cash-on-cash differ?
Cap rate ignores financing; cash-on-cash includes debt service and cash invested. The Rental Property Calculator shows both so leverage effects are visible. Heavy loans can raise or destroy cash-on-cash while cap rate stays the same.
Does this include income taxes?
Basic NOI, cap rate, and cash-on-cash figures here are before personal income tax. Depreciation, interest deductibility, and tax brackets change after-tax return. Confirm tax treatment with a tax professional.
How does this relate to rent vs buy and ROI tools?
The Rent vs Buy Calculator compares renting and buying a home to live in. The Rental Property Calculator underwrites an income property. The ROI Calculator measures gain versus cost on a simpler investment framing on QuickCalculators.
Should vacancy be included in NOI?
Yes. Reduce scheduled rent to effective rent before subtracting operating expenses, or the NOI and cap rate will be overstated. The Rental Property Calculator should use the rent figure that already reflects expected vacancy when that is how the deal is underwritten.
Is a higher cap rate always better?
A higher cap rate means more NOI per dollar of price at the same definition of income, but it can also signal higher risk, weaker location, or deferred maintenance. Compare cap rates within a market and property type rather than chasing the largest percentage alone.
Summary
The Rental Property Calculator builds from NOI = rent - operating expenses (excluding mortgage), then cap rate = NOI / value, so $12,000 NOI on a $200,000 property is a 6% cap rate. Cash flow subtracts annual mortgage payments from NOI; cash-on-cash divides that cash flow by cash invested, so $3,000 on $50,000 invested is 6%.
Cap rate compares unlevered yield; cash-on-cash shows levered cash return. These results are estimates for information only, not investment advice.