RentCalc / Landlord returns
Rental property calculator
For landlords and would-be landlords: is the rent worth the price? Get the cap rate, gross and net yield, cash flow after the mortgage and cash-on-cash return.
Monthly cash flow
$116
after a $1,497 mortgage payment
Lenders commonly look for a DSCR of 1.2 or more on investment property loans.
Where the rent goes
Every return figure is some slice of this waterfall. Step through it to see what each metric divides. These are your numbers from above.
- Rent (12 months)$28,800
- Vacancy-$1,440
- Operating costs-$8,004
- NOI$19,356
- Mortgage-$17,963
- Cash flow$1,393
Cash flow is what's left after the lender is paid. Divide it by the cash you put in and you have cash-on-cash return: 1.66%.
Setting the rent on a property you own
Start with comparable listings, meaning similar size, bedrooms and condition within a short distance, then sanity-check against this calculator. The rent has to cover the mortgage and running costs with room to spare for vacancy and repairs. If it only works at 0% vacancy, it doesn't work. When you screen applicants, the rent-to-income calculator converts your rent into the income to ask for. At renewal time, the rent increase calculator checks raises against state caps.
Maintenance at 5–10% of rent and a 5–8% vacancy allowance are common planning assumptions. Older buildings and student areas usually need more. Management companies typically charge 8–12% of collected rent.
Questions people ask
How do you calculate cap rate?
Cap rate = net operating income (NOI) ÷ property price. NOI is a year's rent, minus vacancy, minus operating costs (taxes, insurance, repairs, management, HOA), before any mortgage payment. A $300,000 property with $18,000 NOI has a 6% cap rate.
What is the difference between gross and net rental yield?
Gross yield is annual rent ÷ price, with no costs taken out. Net yield (effectively the cap rate) subtracts vacancy and operating expenses first. Gross yield is handy for comparing listings quickly; net yield is what you actually earn before financing.
What is a good cap rate?
There's no universal number. It depends on location, property type and interest rates. Lower cap rates usually mean pricier, lower-risk areas, and higher ones usually mean more risk or more work. Compare against similar properties in the same market and against your borrowing cost.
What is cash-on-cash return?
Annual cash flow after the mortgage, divided by the cash you actually put in (down payment plus closing costs and initial repairs). It shows how hard your own money is working once leverage is included.
What is the 1% rule?
A quick screening test: monthly rent should be at least 1% of the purchase price (a $200,000 house renting for $2,000). It's a filter for spotting deals, not a substitute for a full cash-flow calculation, and it is hard to meet in high-cost markets.