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Rental Property Calculator
Enter a deal's price, financing, rent and expenses to underwrite it the way lenders and investors do.
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How the numbers are calculated
- Net operating income (NOI) = effective gross income − operating expenses. Effective gross income is scheduled rent plus other income, less vacancy. Mortgage payments are not an operating expense.
- Cap rate = annual NOI ÷ purchase price. It measures the property's yield independent of financing.
- Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested (down payment + closing costs + rehab).
- DSCR = NOI ÷ annual debt service. Many lenders want 1.20–1.25 or more.
- Gross rent multiplier (GRM) = price ÷ annual gross rent. Lower is cheaper per dollar of rent.
- 1% rule: monthly rent ≥ 1% of price. A quick screen, not a verdict.
Worked example
A $250,000 duplex-side rental rents for $2,000/month with 5% vacancy. Management, maintenance and CapEx reserves take 18% of collected rent, and property tax plus insurance run $4,200 a year. Collected rent is $22,800, expenses are $8,304, so NOI is $14,496 and the cap rate is 5.80%. With 20% down at 6% on a 30-year loan, debt service is about $14,389 a year, leaving roughly $107 of annual cash flow (a DSCR of 1.01). The deal fails the 1% rule (0.8%). It works only if you can raise rent or cut costs.
Cap rate and GRM benchmarks
Use these ranges as orientation when comparing markets — not as pass/fail thresholds. Your local market conditions, property age and rental demand matter more than any national benchmark.
| Market type | Typical cap rate | Typical GRM | Interpretation |
|---|---|---|---|
| High-demand urban (NYC, SF, LA) | 3–5% | 14–20× | Prices are high relative to rents; appreciation is the primary return thesis |
| Mid-size city (Chicago, Austin, Nashville) | 5–7% | 10–14× | Better income yield; cap rates and GRM are both more investable |
| Suburban and secondary markets | 6–10% | 8–12× | Stronger cash flow; more inventory; verify demand and vacancy data locally |
| High-risk or rural markets | 10–15%+ | 5–8× | High nominal yield but vacancy, tenant quality and exit liquidity risk are elevated |
Ranges are illustrative based on market reporting through 2025–2026. Individual properties vary widely; always verify with local broker comps and recent sales data.
Frequently asked questions
What is a good cap rate for a rental property?
It depends on market and risk. Many investors look for 5–8% in stable markets and higher in riskier ones. Compare cap rates within the same area and property type.
Why is the mortgage excluded from NOI?
NOI measures how the property performs regardless of how it is financed, so two buyers with different loans can compare the same asset. Debt service is subtracted afterwards to get cash flow.
What vacancy rate should I use?
Use local data. 5–8% is a common starting assumption; use more for weaker markets or short-term tenancies.
What is a good cash-on-cash return?
Most buy-and-hold investors target 6–10% cash-on-cash in the current rate environment. Below 6% means the property is heavily appreciation-dependent; above 10% is possible but often signals higher-risk markets or below-market purchase prices. Compare to your alternative investments — a safe 5% bond yield raises the bar for a real estate deal.
How should I use the 1% rule?
The 1% rule (monthly rent ≥ 1% of price) is a quick filter, not a decision rule. It was calibrated when interest rates were lower; at current mortgage rates, many deals that pass the 1% rule still cash flow poorly. Use it to eliminate obvious non-starters quickly, then run the full NOI and cash-flow analysis before making an offer.
What is GRM and how does it compare to cap rate?
Gross rent multiplier (GRM) is price ÷ annual gross rent. Lower is cheaper relative to rents. GRM is faster to calculate because it ignores expenses, but that means two properties with identical GRMs can have very different cap rates if one has higher taxes or management costs. Use GRM for quick screening; use cap rate for actual underwriting.
Formulas last reviewed . Results are estimates for educational use; not financial advice. Methodology →