Rental Property ROI Calculator
See your real cash-on-cash return — the yield on the cash you actually put in, after the mortgage — plus cap rate and the DSCR lenders check.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator measures a rental property’s cash-on-cash return: the pre-tax cash flow it produces each year as a percentage of the cash you actually invested — down payment, closing costs, and rehab. Unlike cap rate, it includes your mortgage, so it answers the question owners actually ask: what does the cash I put in earn me? It also reports the cap rate, the monthly cash flow, and the DSCR coverage ratio lenders check before approving the loan.
The formulas
- Cash invested
- down payment + closing costs + rehab, where down payment = purchase price × down-payment %
- Net operating income (NOI)
- gross annual rent × (1 − vacancy %) − annual operating expensesOperating expenses exclude the mortgage — taxes, insurance, maintenance, and management belong here.
- Annual debt service
- monthly payment × 12, where the monthly payment = loan × (monthly rate × (1 + monthly rate)^number of payments) ÷ ((1 + monthly rate)^number of payments − 1)
- Annual pre-tax cash flow
- net operating income − annual debt service
- Cash-on-cash return
- annual pre-tax cash flow ÷ cash invested
- Cap rate
- net operating income ÷ purchase priceShown alongside for comparison — it is the unlevered yield, before any loan.
- DSCR
- net operating income ÷ annual debt serviceLender standard minimum is 1.25×; below 1.0 the rent does not cover the mortgage.
Worked example
- Say you buy a $400,000 rental with 25% down, $8,000 closing costs, and $5,000 of rehab, financing $300,000 at 7.5% over 30 years; it grosses $42,000/yr in rent with 5% vacancy and $12,000/yr of operating expenses.
- Cash invested = $100,000 + $8,000 + $5,000 = $113,000.
- NOI = $42,000 × 0.95 − $12,000 = $39,900 − $12,000 = $27,900.
- The mortgage runs $2,097.64/month — $25,171.72/yr of debt service.
- Annual pre-tax cash flow = $27,900 − $25,171.72 = $2,728.28, or about $227.36/month.
- Cash-on-cash = $2,728.28 ÷ $113,000 = 2.41% — thin by the rule-of-thumb bands; the cap rate is 6.98%, and DSCR = $27,900 ÷ $25,171.72 = 1.11, below the 1.25× lender standard, so a lender may decline and there is little cushion for vacancy or repairs.
Rates, benchmarks & sources
- Cash-on-cash interpretation: below 0% negative (the property costs you cash monthly), 0–4% thin, 4–8% moderate, above 8% strong — Rule-of-thumb bands (not lender policy or a guarantee)
- DSCR minimum of 1.25× (NOI ≥ 1.25 × annual debt service) — Commercial lender underwriting standard (marked authoritative in our benchmark config)
- Monthly mortgage payment and annual debt service — Standard level-payment amortization formula (financial convention)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Pre-tax only: depreciation, the mortgage-interest deduction, and your tax bracket materially change the after-tax picture and are outside this tool; state treatment varies too.
- Ignores appreciation and principal paydown — cash-on-cash measures cash yield only, so a property with weak cash flow can still build wealth (and vice versa).
- Year-one snapshot: rent growth, expense inflation, and future capital expenditures (roof, HVAC) are not modeled — many owners hold a reserve that this tool does not deduct.
- The loan terms are your estimate, not an approval; investment-property rates and required down payments come from lender underwriting.
- Vacancy is a flat percentage; a single month of turnover on a single-unit property is 8.3% vacancy in that year, so small properties swing harder than the average suggests.
Frequently asked questions
What is a good cash-on-cash return?
By the rule-of-thumb bands this tool uses: below 0% the property costs you money every month, 0–4% is thin, 4–8% is moderate, and above 8% is strong. These are heuristics, not rules — a thin cash-on-cash can be acceptable if you are banking on appreciation and principal paydown, but the cash flow is your margin for surprises. The default example’s 2.41% shows how quickly today’s rates eat into leveraged returns.
What is the difference between cash-on-cash return and cap rate?
Cap rate is the property’s own yield with no loan: NOI divided by price — the same for every buyer, useful for comparing properties. Cash-on-cash is your return after the mortgage: cash flow left over, divided by the cash you personally put in. Leverage drives a wedge between them: the default property has a 6.98% cap rate but only a 2.41% cash-on-cash, because the 7.5% loan costs more than the property yields.
Will a lender approve the mortgage this tool assumes?
This is an estimate, not underwriting — the tool cannot tell you what a lender will offer. Lenders on investment property look at the DSCR (they commonly want NOI of at least 1.25× the annual debt service — the lender-standard minimum in our benchmarks), plus your credit, reserves, and down payment. The default scenario’s 1.11 DSCR is below that bar, which is exactly the kind of thing that surfaces in underwriting. Actual rate and terms depend on the lender.
What should I include in operating expenses?
Property taxes, insurance, maintenance and repairs, property management, utilities you pay, HOA dues, and similar running costs — everything it takes to operate the property except the mortgage. Debt service is kept separate so the tool can show NOI, cap rate, and DSCR correctly. If you self-manage, consider including a management figure anyway: it shows whether the property works when your time is not free.
Why does the tool show negative cash-on-cash for my numbers?
Your operating income after vacancy and expenses is less than the mortgage payments, so you feed the property cash every month. That is not automatically a bad investment — appreciation and principal paydown may still make it work out — but it means your return depends entirely on the market, and every vacancy or repair comes out of your pocket. The tool flags it because many buyers do not realize the deal is cash-negative until after closing.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Rates shown are estimates; actual offers depend on lender underwriting.