How this calculator works
Effective rent is the rent minus vacancy. Operating expenses include property tax, insurance, maintenance and management.
Net operating income (NOI) is effective rent minus operating expenses, before the mortgage.
Cap rate = NOI ÷ purchase price, a quick way to compare properties regardless of financing.
Cash-on-cash return = yearly cash flow after the mortgage ÷ the cash you put in (down payment plus closing and repairs).
Worked example
$320,000 property, 25% down at 7%, $2,600 rent
- NOI: about $19,100 a year, a 5.98% cap rate.
- Mortgage: about $1,597 a month.
- Cash flow is close to zero, so returns would rely on appreciation and loan paydown.
Questions people ask
What is a good cap rate?
It varies by market; many investors look for 5% to 10%. Higher cap rates often come with higher risk or lower-demand areas.
What is the 1% rule?
A quick screen: monthly rent at least 1% of the price. It is rare in expensive markets and not a substitute for full numbers.
How much should I budget for maintenance?
Often 5% to 10% of rent, more for older properties, plus reserves for big items like roofs.
How are rental profits taxed?
Rental income is taxable, but depreciation of the building usually offsets much of it. Selling can trigger depreciation recapture.
Last reviewed October 2, 2026