For informational purposes only. Not financial, investment, or tax advice. Results are estimates based on the inputs provided. Consult a qualified financial professional before making financial decisions.
Calculator tool
How this calculator works
Use the explanation to understand the formula, assumptions, and practical limits behind the calculator result.
What Does This Calculator Measure?
This calculator compares a rental property's income with its price and cash invested. It returns:
- Annual gross income from rent
- Annual net income after the expenses you enter
- Cap rate based on purchase price
- Simplified cash-on-cash return based on down payment
Core Formulas
In this live tool, the cash-on-cash figure is simplified to:
That means it does not subtract mortgage debt service or include closing costs. Treat it as a simplified yield on the cash entered, not a full leveraged-investment model.
Practical Example
Assume:
- Purchase price: 250,000 USD
- Monthly rent: 2,000 USD
- Monthly expenses: 600 USD
- Down payment: 50,000 USD
| Metric | Result |
|---|---|
| Annual gross income | 24,000 USD |
| Annual expenses | 7,200 USD |
| Annual net income | 16,800 USD |
| Cap rate | 6.72% |
| Simplified cash-on-cash return | 33.60% |
What Should Monthly Expenses Include?
Use realistic recurring costs such as property taxes, insurance, repairs, maintenance, management fees, utilities you pay, and vacancy reserves if you want the result to be useful. The IRS treats many rental-property costs, including maintenance, insurance, taxes, and interest, as rental expenses, but this calculator only uses the single monthly-expense number you provide.
Common Mistakes to Avoid
Leaving out vacancy or maintenance. A property can look profitable only because costs were understated.
Reading simplified cash-on-cash as true leveraged return. Without mortgage payments and closing costs, it is not a complete financing analysis.
Comparing cap rates across unlike properties. Location, condition, vacancy risk, tenant quality, and repair exposure matter even when the headline rate looks similar.
For financing decisions, connect this result with the Mortgage Calculator, Down Payment Calculator, and ROI Calculator.
Frequently asked questions
What is the difference between cap rate and cash-on-cash return?
Cap rate compares net operating income with the property's purchase price, so it is useful for property-level comparison. Cash-on-cash return compares income with the cash you invested. In this calculator, the cash-on-cash figure is simplified because mortgage payments and closing costs are not included.
What should I put in monthly expenses?
Include recurring ownership costs you expect to bear: property taxes, insurance, repairs, maintenance, management fees, utilities you pay, HOA dues if relevant, and a vacancy reserve. Understating expenses is one of the fastest ways to make a weak deal look strong.
Why can the simplified cash-on-cash number look very high?
Because the denominator is only the down payment while debt service is excluded. A financed property can show an attractive simplified percentage here and still produce much lower real cash flow after mortgage payments.
Which related calculator should I use next?
Use the Mortgage Calculator to add financing cost, the Down Payment Calculator to compare upfront cash, and the ROI Calculator when you want a broader return measure.
