Rental Property ROI Calculator
Cap rate, cash-on-cash, and IRR for the same property tell different stories. Plus the line items rookies miss: vacancy, maintenance reserve, capital expenditures, property management.
How the math works
Three return metrics for the same property:
- Cap rate = NOI ÷ purchase price. Pure operating return, financing-agnostic.
- Cash-on-cash = (NOI − debt service) ÷ down payment. The leveraged annual return on cash invested.
- IRR = full multi-year return including appreciation and exit. The honest long-run number.
NOI honesty: rookies compute (rent − mortgage). Real NOI subtracts vacancy (5-8%), maintenance reserve (1% of value), capex reserve (1% of value), property management (8-10% of rent if outsourced), property tax, insurance, and HOA. The "10% rental yield" headline often becomes 4-5% real NOI.
The 1% rule: monthly rent ≥ 1% of purchase price was a 2010s heuristic. In 2026 markets, finding 0.6-0.7% deals is more realistic. The rule is a screening filter, not a promise.
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Real-world scenarios
- First rental: the line items that turn 10% gross yield into 4% real return — vacancy, maintenance, capex, management, taxes — what each does to the headline number.