A rental property makes money in four ways: monthly cash flow, the loan being paid down by tenants’ rent, appreciation, and tax benefits. It also has plenty of ways to lose money: vacancies, repairs, rising taxes and a mortgage that doesn’t care whether the unit is occupied. This rental property calculator models the cash side in full. It shows year-one cash flow and the key ratios, then projects every year of your holding period through a sale, including the internal rate of return.
How to use the rental property calculator
- Enter the purchase price, down payment, interest rate, term, closing costs and any repairs needed before renting.
- Enter the monthly rent, any other income, a vacancy allowance and the expected yearly rent growth.
- Enter expenses: yearly property tax and insurance, monthly HOA dues and owner-paid utilities, and percentages of rent for maintenance, capital reserves and management.
- Set how many years you hold it, the expected value growth and the selling costs at the end.
Key formulas
Break-even occupancy is the share of the year the unit must be rented to cover expenses and the mortgage. IRR is the yearly return that makes the present value of all cash flows equal the cash you invested. Those cash flows are each year’s cash flow plus the net proceeds of a sale at the end.
Worked example
A $300,000 single-family rental, bought with 25% down ($75,000) and $9,000 of closing costs, so $84,000 of cash invested. The $225,000 loan is at 7% for 30 years. Rent is $2,700 a month.
- Effective income: $32,400 × 95% = $30,780
- Expenses: $3,600 tax + $1,500 insurance + 10% of rent for maintenance and reserves ($3,240) + 8% management ($2,462) = $10,802
- NOI: $19,978, a 6.66% cap rate
- Mortgage: $1,496.93 a month, or $17,963 a year
- Cash flow: $2,014 a year, about $168 a month. Cash-on-cash return is 2.4% and DSCR is 1.11.
- Break-even occupancy: 88.2%
Thin, but the long view looks better. With rents and expenses rising 3% a year, cash flow grows to $8,103 by year 10. If the home appreciates 3% a year and sells after 10 years with 6% selling costs, the sale nets $185,907 after paying off the loan. Total profit is $151,296 on $84,000 invested, a 12.04% IRR and a 2.80× equity multiple.
Reading the results
- Negative or near-zero cash flow makes the investment depend on appreciation and leaves little cushion for surprises. A larger down payment, a lower price or higher rent fixes it.
- DSCR below 1.25 may limit financing options or require more down.
- Cap rate vs. the loan’s cost. Compare the cap rate with the loan constant: yearly payments ÷ loan amount, 7.98% here. When the cap rate is lower, each borrowed dollar costs more than it earns, so borrowing drags down your cash yield. This is called negative leverage. The cap rate calculator focuses on the unleveraged view.
- Sensitivity. Try 10% vacancy, a 1% lower appreciation rate or a $5,000 roof in year five to see how sturdy the deal is.
Taxes aren’t included, but they matter. Residential rental buildings are depreciated over 27.5 years, which often shelters much of the cash flow. Estimate it with the rental property depreciation calculator. For irregular cash flows such as a major renovation, the IRR calculator handles any sequence.
Estimates only, not investment or tax advice. Real rents, vacancies, repairs and sale prices vary; verify numbers with leases, inspections and local data.
Frequently asked questions
How do you calculate rental property cash flow?
Start with rent at full occupancy, subtract a vacancy allowance to get effective income, then subtract operating expenses to get net operating income (NOI). Subtract the mortgage payment from NOI. In the default example, $1,664.80 of monthly NOI minus a $1,496.93 mortgage leaves $167.87 a month.
What is a good cash-on-cash return?
Cash-on-cash return is the first year's cash flow divided by the cash you put in. Many investors look for 6% to 10% or more, but it depends on how much appreciation and loan paydown you expect. A property can show a low cash-on-cash return and still produce a solid IRR once equity growth is included.
What is DSCR and why do lenders care?
The debt service coverage ratio is NOI divided by the yearly mortgage payments. A DSCR of 1.25 means the property earns 25% more than it needs to pay the loan. Many lenders, including DSCR-loan programs, want at least 1.0 to 1.25.
What is the 1% rule?
It is a quick screen saying monthly rent should be at least 1% of the purchase price, so a $300,000 property should rent for $3,000. It ignores taxes, insurance and financing, so treat it as a filter, not a verdict. Many properties in expensive markets fall below 1% and still work through appreciation.
Why include maintenance and capital reserves if nothing is broken?
Roofs, water heaters, appliances and flooring wear out on a schedule whether or not anything is broken today. Setting aside about 5% of rent for routine repairs and another 5% or so for big replacements smooths those costs. Without them, cash flow looks better on paper than it is.