What is a good cap rate for a rental property?

Cap rate benchmarks vary by market and property type. Residential rentals in secondary/tertiary markets: 6–8% is solid. In high-cost primary markets (LA, NYC): 3–5% is normal. Commercial: 5–9%. A higher cap rate means more income relative to price — but usually signals more risk or a weaker market.

How much down payment do I need for a rental property?

Most conventional lenders require 20–25% down for investment properties (non-owner-occupied). FHA loans require only 3.5% but mandate owner-occupancy. Some investors use the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) to recycle capital after forced appreciation. The higher down payment lowers monthly cash flow drag from the mortgage.

What expenses should I include in the monthly expenses field?

Include: property tax (divide annual by 12), homeowner's insurance, estimated maintenance (1% of value/year ÷ 12 is a common rule), property management fees (8–12% of rent if using a manager), HOA dues, and a capital expenditure (CapEx) reserve for roof, HVAC, appliances (typically 5–10% of rent). Mortgage principal and interest are calculated separately.

Is rental income taxed as ordinary income?

Yes — net rental income (rent minus deductible expenses) is taxed as ordinary income at your marginal rate. However, you can deduct mortgage interest, property taxes, insurance, repairs, and depreciation (building value over 27.5 years). Depreciation often turns cash-positive rentals into paper losses for tax purposes — one of the biggest tax advantages of real estate.

Rental Property ROI Calculator — Cash Flow & Returns | KalkWise

By the KalkWise Editorial Team Reviewed for accuracy Updated June 2026

What is the rental property roi calculator — cash flow & returns?

In short

A $300,000 rental property with 20% down ($60,000), $2,200/month rent, and $600/month expenses at 7% / 30-year generates roughly $147/mo positive cash flow, a 2.9% cash-on-cash return, and a 6.1% cap rate. Over 10 years at 3% appreciation the total ROI is approximately 112% (7.9%/yr annualized).

This rental property ROI calculator estimates monthly cash flow, cap rate, cash-on-cash return, and total investment return over a hold period. It accounts for vacancy, mortgage principal and interest, operating expenses, and property appreciation — the five numbers every landlord needs before buying.

How to use this calculator

1Enter the purchase price and down payment (investment properties typically require 20–25% down).
2Enter the mortgage rate and term — use current investment property rates, which run ~0.5–1% higher than primary residence rates.
3Enter monthly gross rent and vacancy rate (5–10% is typical; 1 month vacant = 8.3%).
4Enter total monthly operating expenses: property tax, insurance, maintenance, management fees, HOA.
5Set your expected annual appreciation and hold period to see projected total ROI.

The formula

NOI=effective rent−expenses

cash flow=NOI−mortgage P&I

cap rate=NOIpurchase price

CoC return=annual cash flowcash invested

Net Operating Income (NOI) = effective rent (gross rent minus vacancy) minus operating expenses. Cash flow = NOI minus mortgage P&I. Cash-on-cash return = annual cash flow / total cash invested. Cap rate = NOI / purchase price. Total ROI = (equity gain + cumulative cash flow) / cash invested over the hold period.

NOI: — Net Operating Income — effective rent minus all operating expenses (before mortgage)
cash flow: — NOI minus monthly mortgage payment — the money you actually pocket
cap rate: — NOI / purchase price — measures property yield independent of financing
CoC return: — Cash-on-cash return — annual cash flow / total cash invested (down + closing costs)
total ROI: — Equity gain at sale plus cumulative cash flow, divided by cash invested

Worked example

The scenario

$300,000 property, $60,000 down (20%), 7% mortgage / 30 years, $2,200/month rent, 7% vacancy, $600/month expenses, 3% annual appreciation, 10-year hold.

gives

The result

Monthly P&I: ~$1,596. Effective rent (7% vacancy): $2,046. NOI: $2,046 − $600 = $1,446/mo. Cash flow: $1,446 − $1,596 = −$150/mo (slightly negative). Cap rate: $17,352 NOI / $300,000 = 5.8%. At 3% appreciation for 10 years the property reaches ~$403,000 — total ROI driven primarily by equity gain.

Common use cases

Evaluating whether a rental property is worth buying before making an offer
Comparing two investment properties side-by-side
Stress-testing cash flow when rates or rents change
Estimating total returns over a 5-, 10-, or 20-year hold period

Limitations & assumptions

Does not model tax benefits (depreciation, mortgage interest deduction) which can significantly improve after-tax returns.
Appreciation is assumed at a constant annual rate — actual appreciation is volatile year to year.
Closing costs are estimated at ~2% of purchase price; actual costs vary by state and transaction.
Expense growth over time (property tax increases, inflation on maintenance) is not modeled.
Does not include principal paydown benefit in year-by-year cash flow — it does appear in total equity at sale.

Frequently asked questions

Most investors target 6–10% cash-on-cash return. Below 5% is weak unless appreciation is expected to compensate. Above 10% is strong for a leveraged property. In high-cost markets (NYC, SF) many properties generate negative cash flow and investors rely entirely on appreciation — a riskier strategy.

Disclaimer: KalkWise calculators are provided for general informational and educational purposes only and do not constitute financial, investment, tax, or legal advice. Results are estimates based on the figures you enter and the assumptions described above. Actual outcomes will vary. Consult a qualified professional before making financial decisions.

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