How to calculate rental property
Collected rent = rent × (1 − vacancy%) NOI = collected rent − operating costs − reserves Cash flow = NOI − mortgage payment Cap rate = annual NOI ÷ purchase price × 100 Cash-on-cash return = annual cash flow ÷ upfront cash × 100
Worked example. Monthly cash flow: $137.85 / month.
Example inputs — Purchase price: $300,000; Down payment: 25%; Monthly rent: $2,500; Mortgage rate: 6.5%; Loan term: 30 years; Operating expenses: $500 / month; Vacancy allowance: 5%; Maintenance reserve (% of rent): 5%; Management (% collected rent): 8%; Closing costs: $6,000; Initial repairs: $4,000. Starting values are illustrative.
Before income tax and appreciation. Operating expenses should include property tax, insurance and HOA, but exclude the separately entered reserves and mortgage.
From George Guju, founder of Calculyn · Educational calculator guidance, not professional advice.
How it works
Start with achievable monthly rent, subtract a vacancy allowance, then deduct operating expenses, maintenance reserves and management fees. Mortgage principal and interest come out after net operating income (NOI). Cap rate compares annual NOI with the purchase price without financing; cash-on-cash return compares after-debt cash flow with the down payment, closing costs and initial repairs. Include property tax, insurance, HOA and owner-paid utilities in operating expenses. Do not count maintenance or management twice. Compare a lower-rent or higher-vacancy scenario before buying; a positive average estimate does not guarantee every month will be profitable.
Assumptions & limitations
- Steady monthly rent and expenses; vacancy is a planning allowance, not a forecast.
- Fixed-rate, fully amortizing loan; 100% down means no mortgage payment.
- Maintenance reserves are deducted conservatively in this planning NOI; accounting NOI may treat capital reserves separately.
- Excludes appreciation, selling costs, depreciation benefits, income taxes and principal-paydown returns.
Formula and assumptions reviewed October 2026 by the Calculyn team. How we build our calculators
Frequently asked questions
What is the difference between cap rate and cash-on-cash return?
Cap rate divides annual net operating income by purchase price and ignores financing. Cash-on-cash return divides annual cash flow after mortgage payments by your upfront cash investment.
Does mortgage principal count as an operating expense?
No. Principal and interest are financing payments deducted after NOI when estimating cash flow. Principal builds equity, but that equity increase is not spendable rental cash flow.
What expenses should I enter for a rental property?
Include property taxes, insurance, HOA, owner-paid utilities and other recurring costs. Enter maintenance reserves and management fees in their separate fields to avoid double counting. Add one-time repairs and closing costs to upfront cash instead.
Does this rental return include appreciation or taxes?
No. It estimates ongoing rental cash flow only. Appreciation, depreciation, tax deductions and sale proceeds require separate assumptions and are not included in this return.