Rental Property ROI Calculator
Estimate cash flow and cash-on-cash return on investment for a rental property.
What is cash-on-cash ROI?
Cash-on-cash return measures the annual pre-tax cash flow a rental property generates relative to the actual cash you invested — typically your down payment plus closing costs. It's calculated as annual cash flow divided by total cash invested, expressed as a percentage, and is one of the most popular metrics real estate investors use to compare deals because it focuses on actual cash returns rather than paper appreciation.
How monthly cash flow is calculated
Monthly cash flow is your rental income minus all monthly operating expenses (property taxes, insurance, maintenance, property management, vacancy reserves, and similar costs) and minus your mortgage payment. A positive cash flow means the property generates more income than it costs to operate and finance each month; a negative cash flow means you're subsidizing the property out of pocket.
Why cash-on-cash ROI matters for investors
Cash-on-cash ROI helps investors quickly compare the cash efficiency of different properties or financing structures, since a smaller down payment (more leverage) generally increases cash-on-cash ROI as long as the property still cash flows positively. However, it doesn't capture appreciation, tax benefits, principal paydown, or the added risk of leverage, so it's best used alongside other metrics like cap rate and total return when evaluating a rental investment.
Frequently Asked Questions
What is a good cash-on-cash ROI for a rental property?
Many investors target 8-12% cash-on-cash ROI as a solid benchmark, though acceptable returns vary by market, risk tolerance, and financing terms. Higher-leverage deals in strong rental markets can sometimes exceed this range.
What counts as "total cash invested"?
Total cash invested typically includes your down payment, closing costs, and any upfront repair or renovation costs needed to get the property rent-ready. This calculator uses your down payment as a simplified proxy for total cash invested.
What's the difference between cash-on-cash ROI and cap rate?
Cap rate measures a property's return based on its full purchase price without factoring in financing, while cash-on-cash ROI measures return based only on the actual cash you invested, factoring in your mortgage payment. Cash-on-cash is more useful for leveraged investors, while cap rate is often used to compare properties independent of financing.
Does a bigger down payment increase or decrease cash-on-cash ROI?
A smaller down payment (more leverage) generally increases cash-on-cash ROI, as long as the property still generates positive cash flow, because you're earning the same cash flow on less invested capital. However, more leverage also increases risk if rents fall or expenses rise.
What expenses should I include in the monthly expenses field?
Include property taxes, insurance, maintenance reserves, property management fees, HOA dues, and a vacancy allowance. Leaving out any of these will make your cash flow and ROI look better than they realistically will be.
Does this calculator account for appreciation or tax benefits?
No, this tool focuses only on cash flow and cash-on-cash return. It doesn't factor in property appreciation, mortgage principal paydown, or tax deductions like depreciation, all of which can add to your total real return over time.
What if my monthly cash flow is negative?
Negative cash flow means the property costs more to operate and finance than it brings in each month, so you'd need to cover the shortfall out of pocket. Some investors accept this temporarily for appreciation potential, but it increases financial risk.
How can I improve my rental property's ROI?
You can improve ROI by increasing rental income (renovations, better tenant screening), reducing operating expenses, refinancing to a lower mortgage rate, or negotiating a lower purchase price to reduce your invested capital. Even small changes to rent or expenses can meaningfully shift your cash-on-cash return.