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

Cap rate = Net Operating Income / Purchase Price. It measures property yield independent of financing. In major cities, 4–6% is typical; in secondary markets, 6–9% is common. Higher cap rates generally mean more risk or lower appreciation potential. Investors typically target cap rates above the local risk-free rate.

What is cash-on-cash return?

Cash-on-cash return = Annual Cash Flow / Total Cash Invested (down payment + closing costs). It measures the actual cash return on the equity you've deployed. A 6–12% cash-on-cash return is generally considered solid for rental properties in most markets.

How much should I budget for maintenance and vacancy?

Industry standards: vacancy 5–10% of gross rent (or 1 month/year), maintenance 1% of property value annually, capital expenditures 1% additional. Many new investors skip CapEx (roof, HVAC, appliances) and are shocked when large bills arrive.

What is the 1% rule for rental property?

The 1% rule is a quick screen: monthly rent should be at least 1% of purchase price. A $200,000 property should rent for $2,000+/month. Properties that meet the 1% rule are more likely to cash flow positively. In expensive markets, 0.5–0.7% is common — meaning thin or negative cash flow is typical.

📈Investing

Will This Rental Property Actually Make Money?

Will this rental property make money?

What This Does

Rental real estate is one of the most popular wealth-building vehicles — but most aspiring landlords dramatically underestimate expenses and overestimate net income. The difference between a cash-flowing property and a money pit often comes down to a few key metrics that most buyers never calculate before closing. This calculator runs a complete rental property analysis: gross rental income, vacancy allowance, operating expenses (taxes, insurance, maintenance, management, utilities), net operating income (NOI), mortgage debt service, and — most critically — monthly cash flow after all expenses and mortgage payments. It then computes three key investment metrics: Cap Rate (NOI / purchase price, a measure of property yield independent of financing), Cash-on-Cash Return (annual cash flow / total cash invested, the true return on your equity), and the Gross Rent Multiplier (purchase price / annual rent, a quick valuation screen). The difference between gross rent and actual cash flow is almost always larger than new investors expect. Vacancy costs alone typically run 5–10% of gross rent. Maintenance averages 1% of property value per year. Management fees are 8–12% of rent. Property taxes vary dramatically by state. Getting these right is the difference between a good investment and an expensive learning experience.

When Should You Use This?

→Evaluating a rental property before making an offer
→Calculating whether a property's asking price makes financial sense
→Comparing two investment properties with different prices and rent profiles
→Understanding your true cash-on-cash return after mortgage, taxes, and expenses
→Determining a maximum purchase price to achieve a target cap rate or cash flow

Example Scenario

David is considering a duplex listed at $380,000 with gross monthly rent of $3,400. He plans to put 25% down ($95,000) and finance the rest at 7.25% for 30 years. After plugging in property taxes ($4,800/yr), insurance ($1,800/yr), maintenance ($3,800/yr), and 8% management fees, his monthly cash flow is -$180 — negative. The cap rate is 4.3% and cash-on-cash return is -2.3%. He decides to negotiate the price down or pass.

🏠Rental Property Calculator

Rental Property Investment Analyzer

Enter purchase price, financing, rent, and expenses to calculate cash flow, cap rate, cash-on-cash return, and 10-year projection. Results update live.