Is a 5% cap rate good for rental property?

It depends on the market, but most traditional underwriting guidelines consider anything above 7–8% acceptable for single-family rentals, while 5% usually signals high-cost coastal areas where appreciation compensates for low yield.

How do I calculate cash-on-cash return manually?

Divide your annual pre-tax cash flow net of all debt service by the total cash you actually put into the deal down payment, closing costs, and immediate capital expenditures, then multiply by 100.

Why does my property fail the 1% rule?

The 1% rule requires gross monthly rent to equal at least 1% of the full purchase price; failing it means your rent-to-price ratio is too low to comfortably cover mortgage payments and operating costs in most counties.

Does this tool factor in mortgage payments or vacancy rates?

No, it uses raw gross figures so you can model different financing scenarios; once you know these baseline yields, cross-check vacancy and debt coverage using our Debt Payoff Calculator for cash-flow projections.

Rental Property ROI Calculator

Quickly analyze potential real estate investments by computing key financial metrics. This tool computes cap rate, cash-on-cash return, and the 1% rule check in one pass, providing immediate insights into a property's viability.

Calculate Your Investment Returns

Purchase Price

Monthly Gross Rent

Annual Operating Expenses

Total Cash Invested

Currency: USD (locked)

Cap Rate

--%

Cash-on-Cash Return

--%

1% Rule

Annual Gross Rent--

Annual NOI--

Annual Cash Flow--

Demystifying Rental Property ROI for Investors

For real estate investors and property managers, quickly verifying whether a rental deal meets basic underwriting thresholds is crucial. This calculator streamlines that process, allowing you to instantly compute three vital investment yield metrics: Cap Rate, Cash-on-Cash Return, and the 1% Rule. Before you even book a viewing or order inspections, this tool provides the clear, actionable data you need to make informed preliminary decisions.

Gone are the days of manual calculations or relying on guesswork. Our tool offers a comprehensive view of a property's potential profitability by analyzing your purchase price, rental income, operating expenses, and initial cash outlay. It's designed to give you a rapid, precise financial snapshot, helping you filter out less viable opportunities and focus on those with true potential.

How to Use This ROI Calculator

Enter the total acquisition cost: Include the purchase price, closing fees, and any immediate renovations needed.
Input the expected gross monthly rent: This is the income you anticipate from the prospective tenant.
Type your estimated annual operating expenses: Factor in property taxes, insurance, maintenance, and vacancy reserves.
Provide the total upfront cash you plan to deploy: This covers your down payment, loan fees, and initial startup capital.
Read the live Cap Rate, Cash-on-Cash return, and 1% Rule status badges as you type: Results update instantly with every input.

FAQ

Q: Is a 5% cap rate good for rental property?

A: It depends on the market, but most traditional underwriting guidelines consider anything above 7–8% acceptable for single-family rentals, while 5% usually signals high-cost coastal areas where appreciation compensates for low yield.
Q: How do I calculate cash-on-cash return manually?

A: Divide your annual pre-tax cash flow net of all debt service by the total cash you actually put into the deal down payment, closing costs, and immediate capital expenditures, then multiply by 100.
Q: Why does my property fail the 1% rule?

A: The 1% rule requires gross monthly rent to equal at least 1% of the full purchase price; failing it means your rent-to-price ratio is too low to comfortably cover mortgage payments and operating costs in most counties.
Q: Does this tool factor in mortgage payments or vacancy rates?

A: No, it uses raw gross figures so you can model different financing scenarios; once you know these baseline yields, cross-check vacancy and debt coverage using our Debt Payoff Calculator for cash-flow projections.