Rental Property Calculator

Cap rate equals NOI divided by purchase price and ignores financing entirely, so two investors paying cash and using 25% down see the same cap rate on the same building. Cash-on-cash return divides annual pre-tax cash flow (after the mortgage) by the actual cash you put in (down payment plus closing costs). Cap rate tells you how well the property itself performs. Cash-on-cash tells you how well your equity check performs after leverage.

The 1% rule says monthly gross rent should be at least 1% of the purchase price ($2,500 a month on a $250,000 house). It is a five-second screen, not a valuation. In most major metro markets in 2026, the 1% rule is hard to clear because prices have run faster than rents for a decade. Treat a failure as a signal to underwrite carefully, not as an automatic reject; pass deals often appear only in secondary markets or distressed inventory.

The 50% rule says operating expenses, excluding the mortgage, tend to consume about half of gross rent across a long hold. Once you add property tax, insurance, vacancy, maintenance, capital expenditures, and management, the number lands closer to 50% than the 25% to 30% most new investors guess. Use it as a sanity check. If your projected opex is much lower than 50% of rent, you are probably underestimating something.

NOI is meant to be capital-structure neutral. The same building has the same NOI whether you bought it all-cash, financed 75%, or financed 90%. Excluding mortgage principal and interest is what makes cap rate comparable across deals. Once you factor the loan in, you have moved from NOI and cap rate to cash flow and cash-on-cash return.

First-time investors usually leave both out and end up with paper deals that bleed cash in year one. Even strong rental markets see 5% to 10% vacancy across a full hold once you count tenant turnover, repairs between leases, and the occasional eviction. Maintenance reserves of 5% to 15% of rent (more on older properties) cover everyday repairs plus the slow-burn capex: roofs, HVAC, water heaters, paint. Budgeting both up front is how you avoid being forced to sell into the next soft market.