Understanding your rental property results
The table below explains what each headline metric measures and the question it is best suited to answer, since cap rate, cash-on-cash return and cash flow can point in different directions for the same property.
| Metric | What it measures | Best used to answer |
|---|---|---|
| Monthly/annual cash flow | Actual dollars left over after the mortgage payment and expenses | Will this property cover its own costs plus a surplus? |
| Cap rate | Unlevered income return relative to property value | How does this property's income performance compare to others, regardless of financing? |
| Cash-on-cash return | Levered return on the actual cash invested (down payment) | What return am I earning on the specific cash I put in, given my financing? |
| NOI | Annual income before debt service and taxes | The foundational income figure behind cap rate and value estimates |
- This calculator assumes a standard 30-year fixed-rate fully amortizing loan; adjustable-rate loans, interest-only periods, or different amortization schedules would change the mortgage payment and therefore cash flow and cash-on-cash return.
- Monthly operating expenses should include property taxes, insurance, maintenance reserves and any management fees, but not the mortgage payment, which is calculated separately by this calculator.
- This model does not account for property appreciation, equity buildup through principal paydown, income tax effects (including depreciation), or closing costs — all of which affect an investment's total return beyond the cash-flow metrics shown here.
What is a rental property analysis?
A rental property analysis combines a property's purchase and financing terms with its expected rental income and operating expenses to produce the key metrics investors use to compare potential purchases: cash flow (what is left over each month after all expenses and the mortgage payment), cap rate (unlevered income return relative to price), cash-on-cash return (levered return on the actual cash invested), and NOI (income before financing costs).
This calculator assumes a standard 30-year fixed-rate amortizing mortgage for the loan portion of the purchase and applies the down payment percentage to the full purchase price to determine both the loan amount and the actual cash invested, which is the denominator for the cash-on-cash return calculation.
Cap rate and cash-on-cash return answer different questions: cap rate shows how the property performs independent of financing, while cash-on-cash return shows the actual return on the cash a specific investor put in, given the specific financing terms used.
How to use this rental property calculator
- Enter the purchase price of the property.
- Enter the down payment percentage you plan to put down.
- Enter the anticipated mortgage interest rate (a 30-year amortization schedule is assumed).
- Enter the expected monthly rent at full occupancy.
- Enter the expected vacancy rate as a percentage of rent.
- Enter total monthly operating expenses (property taxes, insurance, maintenance, management — excluding the mortgage payment), then read the monthly cash flow, cap rate, cash-on-cash return, NOI and mortgage payment.
The formula behind this rental property analysis
The mortgage payment is calculated on the loan amount (purchase price minus down payment) using a 30-year standard amortization formula. Effective monthly rent accounts for vacancy loss, and NOI is calculated on an annualized basis as effective rent minus operating expenses (excluding debt service) — consistent with the standard NOI definition. Cash flow subtracts the mortgage payment from monthly NOI (effective rent minus expenses). Cap rate divides annual NOI by purchase price; cash-on-cash return divides annual cash flow by the cash invested (the down payment).
Worked example: a $300,000 property with 25% down ($75,000, leaving a $225,000 loan) at 7% has a monthly mortgage payment of $1,496.93. With $2,400 monthly rent, 5% vacancy ($2,280 effective rent) and $700 in monthly expenses, annual NOI is $18,960 (($2,280 − $700) × 12) for a cap rate of 6.32% ($18,960 ÷ $300,000). Monthly cash flow after the mortgage payment is $83.07 ($2,280 − $700 − $1,496.93), giving an annual cash flow of about $997 and a cash-on-cash return of about 1.33% ($997 ÷ $75,000).
Common mistakes
- Underestimating monthly operating expenses by excluding maintenance reserves, property management, or periodic costs like landscaping and pest control that are easy to forget in a quick estimate.
- Using gross rent instead of effective (post-vacancy) rent when comparing cash flow across properties in markets with different typical vacancy rates.
- Confusing cap rate with cash-on-cash return — a property can have an attractive cap rate but poor cash-on-cash return (or vice versa) depending entirely on the financing terms used.
- Ignoring that this model excludes appreciation and principal paydown, both of which contribute to total investment return over time even when monthly cash flow is thin or negative.
- Applying a 30-year amortization assumption to a loan actually structured with a different term or as interest-only, which would produce a materially different mortgage payment than this calculator shows.
Câu hỏi thường gặp
What is a good cash flow for a rental property?
There is no single universal figure — acceptable cash flow depends on the market, purchase price, financing terms and an investor's goals. Some investors target a minimum positive monthly cash flow per unit, while others accept lower or even negative cash flow in exchange for expected appreciation in a strong-growth market; this calculator reports the figure without judging what level is 'good' for a specific investor.
What is the difference between cap rate and cash-on-cash return?
Cap rate divides annual NOI (income before financing costs) by the full property value, measuring the property's unlevered performance regardless of how it is financed. Cash-on-cash return divides actual annual cash flow (after the mortgage payment) by the cash actually invested, typically the down payment, measuring the levered return specific to an investor's financing terms. The two can differ substantially for the same property depending on the loan's rate and down payment.
How is the mortgage payment calculated in this tool?
This calculator assumes a standard 30-year fixed-rate fully amortizing loan on the amount financed (purchase price minus down payment), using the standard mortgage amortization formula. If your actual or planned loan uses a different term, an adjustable rate, or an interest-only structure, the real payment would differ from this calculator's estimate.
Does this calculator include property appreciation or tax benefits?
No. This calculator focuses on operating cash flow, cap rate, cash-on-cash return and NOI at a single point in time. It does not model property value appreciation, equity built through principal paydown, or income tax effects such as depreciation — all of which can materially affect a rental property's total long-term return.
What should I include in monthly operating expenses?
Monthly operating expenses typically include property taxes, homeowners or landlord insurance, routine maintenance and repair reserves, and property management fees if applicable. They should exclude the mortgage payment, which this calculator computes separately, and generally exclude major one-time capital expenditures like a roof replacement, which most investors budget for separately.
Tài liệu tham khảo
- Fannie Mae Multifamily. Underwriting guidance — NOI, cap rate and cash flow definitions. fanniemae.com.
- Consumer Financial Protection Bureau (CFPB). Mortgage basics and amortization. consumerfinance.gov.
- Appraisal Institute. The Appraisal of Real Estate. 15th ed. Appraisal Institute, 2020.
- Brueggeman WB, Fisher JD. Real Estate Finance and Investments. 15th ed. McGraw-Hill Education, 2019.
- U.S. Department of Housing and Urban Development (HUD). Multifamily underwriting guidance. hud.gov.