Rental-property ROI calculator for analyzing investment property — Cap Rate, Cash-on-Cash, and total return.
Four tabs: Cap Rate and NOI, Cash-on-Cash return (with financing), 5/10-year total return (cash flow + appreciation + paydown), and Airbnb vs. long-term-rental comparison.
Disclaimer: Local market assumptions and vacancy rates vary. Run comparable research for your area before investing.
Calculator information
📋 How to use this calculator
- Enter the property purchase price ($), acquisition costs (transfer tax, title, initial renovation) for total all-in cost.
- Estimate the monthly and annual rent; compare with comparable listings in the same area.
- Compute operating expenses: property tax, insurance, 8-10% management fee, maintenance at 1-2% of property value per year, and 5-10% vacancy.
- For cash-on-cash, enter the down payment, mortgage rate, and term to compute the monthly payment.
- Project property appreciation of 3-5% annually and mortgage paydown for the 5/10-year total return.
- Compare a short-term rental model (Airbnb/Vrbo, 50-70% occupancy, higher ADR) vs long-term rental in the comparison tab.
- Evaluate exit strategy: cash-out refinance vs sale after 5 years based on IRR.
🧮 Cap Rate and Cash-on-Cash Return
Cap_Rate = NOI / Property_Price; CoC = Annual_Cash_Flow / Total_cash_invested
- NOI (Net Operating Income) = Gross Rental - Operating Expenses
- Operating Expenses = property tax + insurance + maintenance + management + vacancy
- Cash Flow = NOI - annual mortgage payment
- Total cash invested = Down payment + closing cost + renovation
- Total Return = Cash Flow + Appreciation + Mortgage Paydown
A cap rate of 6-10% is generally attractive in most US markets. Cash-on-cash of 8-12% is a common target for financed deals. Avoid properties with a cap rate <4% unless appreciation potential is high or the location is truly prime.
💡 Worked example: $400,000 condo rented long-term with a mortgage
Given:- Purchase price: $400,000
- Down payment 25%: $100,000 + closing $10,000 = total invested $110,000
- Mortgage 75%: $300,000, 7% APR, 30 years
- Rent: $2,800/month = $33,600/year
- OpEx: property tax $4,800 + maintenance $4,000 + management $2,700 + vacancy $1,700 = $13,200/year
Steps:- NOI = 33,600 - 13,200 = $20,400.
- Cap rate = 20,400 / 400,000 = 5.1%.
- Mortgage payment: 300,000 x 0.00583 x (1.00583)^360 / [(1.00583)^360 - 1] = $1,996/month = $23,952/year.
- Cash flow = 20,400 - 23,952 = -$3,552/year (negative).
- CoC = -3,552 / 110,000 = -3.2%.
- Appreciation 4% = $16,000; year-1 mortgage paydown = $3,100; total return = -3,552 + 16,000 + 3,100 = $15,548 = 14.1% on $110,000 invested.
Result: The 5.1% cap rate is below the ideal threshold. Cash flow is negative at -$3,552/year, but total return including appreciation reaches 14.1% (assuming the market rises). Only worthwhile if you are confident appreciation will hold, have outside cash flow to cover the deficit, and plan to exit in 5-10 years.
❓ Frequently asked questions
What is the difference between Cap Rate and ROI?
Cap Rate measures return based on the full property price (unleveraged), useful for comparing properties apple-to-apple. ROI or Cash-on-Cash measures return based on the cash you actually invest (down payment + closing), accounting for mortgage leverage. A 6% cap rate can become a 15%+ CoC if the mortgage terms are favorable, but can also turn into a negative CoC if rates are high.
What is a good cap rate in the US?
Rough 2024-2026 benchmarks: major coastal metros (NYC, SF, LA) 3-5%, Sun Belt cities (Austin, Phoenix, Nashville) 5-7%, Midwest tier-2 (Indianapolis, Cleveland, Memphis) 7-10%, and tertiary markets 9-12%. Higher cap rate = higher risk (lower liquidity, higher vacancy). For short-term rentals in tourist hotspots, gross yields can hit 10-15% but after vacancy, cleaning, and management often settle at 6-9%.
Is short-term rental (Airbnb) better than long-term rental?
It depends on location and effort. Short-term rentals work in tourist destinations or near hospitals/universities with >60% occupancy; gross income is 1.5-2x a long-term rental but OpEx is much higher (cleaning, listing fees, management). Long-term rentals are more stable with lower OpEx, ideal for passive investors. Calculate the break-even occupancy: what percentage of nights are needed for the STR to beat a long-term lease, and check local STR regulations.
How should I estimate property appreciation?
US home prices have averaged ~4-5% per year over the long run (FHFA HPI 1991-2023), though regional variance is huge. Drivers include population growth, supply constraints, and infrastructure investment. Avoid assuming >7% appreciation in your model; be conservative at 3-4% and treat anything higher as upside. Oversupplied markets (some Sun Belt metros in 2022-2024) have even declined 5-10% in a single year.
What are the biggest risks of rental property investing?
Five main risks: (1) extended vacancy - no tenant for 3-6 months; (2) bad tenants - property damage, unpaid rent, eviction difficulties; (3) rising interest rates - higher mortgage costs on adjustable or refinanced loans; (4) special assessments - large HOA or capital-improvement bills; (5) market downturn - if forced to sell at a loss. Mitigation: keep 6 months of payment reserves, carry landlord insurance, use solid lease contracts, and diversify beyond real estate.
📚 Sources & references
Last updated: May 11, 2026