Free Rental Property ROI Calculator

It depends on your market and risk tolerance. Modern major-metro single-family rentals typically run 4–6% cap. Higher-cap markets (cleveland, st. louis, smaller midwest cities) can hit 8–10% but come with higher tenant turnover, capex risk, and slower appreciation. Below 4% is mostly a tax-loss / appreciation play. Above 10% usually means you're taking on operational risk (Class C/D neighborhoods, short-term rentals, or unrealistic rent assumptions). Compare cap rate to the 10-year Treasury for context — historically, a 4-point spread over Treasury is considered fair compensation for the illiquidity and management.

Cap rate uses NOI (Net Operating Income, before debt service) divided by purchase price — it's the unlevered yield. Cash-on-cash uses your annual pre-tax cash flow (after debt service) divided by the cash you put in (down + closing). Cap rate compares deals; cash-on-cash compares the property to other cash investments. With financing at a rate below the cap rate, leverage boosts cash-on-cash; with financing above the cap rate, leverage hurts.

The 1% rule says monthly rent should be at least 1% of the purchase price. A property priced at $200,000 needs to rent for $2,000+/month. It's a quick screen, not a guarantee — a 1%-rule property with high taxes (Texas, Illinois, New Jersey) or expensive HOA can still lose money. Most major US markets stopped producing 1%-rule deals during the 2020–2022 price runup; 0.6–0.8% is the realistic floor now. Use the rule as one of several screens, not as a green light.

NOI = effective gross income − operating expenses. Effective gross income is annual rent × (1 − vacancy rate). Operating expenses include property tax, insurance, HOA, property management, maintenance reserve, and capex reserve. NOI does NOT include mortgage P&I — that's debt service and is separate from operating. NOI ÷ purchase price = cap rate.

Yes, and don't lowball them. Maintenance covers routine repairs (leaks, appliance issues, painting between tenants). Capex covers big-ticket items (roof, HVAC, water heater, full appliance replacement). Industry standard is 5–10% of gross rent EACH for maintenance and capex separately on single-family rentals. Older properties (50+ years) need more. The reserves don't need to physically sit in a savings account each month — but they need to be in your math so you don't convince yourself a deal cash-flows when it actually doesn't.

IRR depends on the hold period and risk profile. Conservative cash-flow plays in major metros typically target 8–12% IRR over a 7–10 year hold. Value-add (BRRRR) deals target 15–25%. Pure appreciation plays in fast-growing markets can hit 18–30% but with much more downside risk. Anything above 30% usually means the assumptions are too optimistic. Compare IRR to the S&P 500's historical 10% nominal, plus an illiquidity / management premium of 3–5%, so 13–15% is the minimum to justify the work over passive index investing.

No — it computes pre-tax returns only. Real estate depreciation (27.5-year straight-line on residential) and the qualified business income deduction can add 1–3 percentage points to your after-tax IRR for a typical rental, but the calculation depends on your specific tax situation, passive activity rules, and whether you qualify as a real estate professional. Consult a CPA for after-tax returns; use this calculator for the underlying deal economics.

Gross Rent Multiplier (GRM) = purchase price ÷ annual gross rent. It's a very quick comparison metric that ignores all expenses — a property at GRM 8 is "cheaper" than one at GRM 12. Cap rate is more accurate because it includes operating expenses. Use GRM for quick screening across many listings; use cap rate when you're ready to dig into a specific deal.