Short answer: a rental “deal” is what’s left after vacancy, taxes, insurance, maintenance, management, and the mortgage — never the gross rent. Example below: a $220,000 house renting for $2,050 a month produces a 6.65% cap rate and just +$122 a month of true cash flow with 25% down at 7% — and the built-in downside case (rent −10%, expenses +10%) flips it to −$118 a month. Run both cases on every property; the downside case is the one you’ll actually live through some years.
| Cap rate | — |
| Cash-on-cash return | — |
| DSCR (NOI ÷ debt payments; lenders often want ≥ 1.20) | — |
| Net operating income (per year) | $0 |
| Mortgage payment (principal & interest) | $0/mo |
| Total cash invested (down payment + closing) | $0 |
Full year-1 breakdown (base and downside cases side-by-side)
| Line | Base | Downside |
|---|
Maintenance and management percentages are charged on collected rent (after vacancy). Gross rent is never treated as profit on this site — vacancy and every expense come out first.
Educational estimate only — not investment advice. Excludes income taxes, depreciation, closing-cost detail beyond the % entered, renovation, and rent growth/appreciation. Verify taxes, insurance, HOA, and local rules (including any short-term-rental restrictions) for the actual property. Your numbers never leave this page.
How this calculator works
Effective rental income = rent × 12 × (1 − vacancy %). Operating expenses include property taxes, insurance, HOA, your “other” monthly costs, and maintenance + management charged as percentages of collected rent. NOI (net operating income) = effective income − operating expenses. – Cap rate = NOI ÷ purchase price (the property’s unleveraged yield) – Cash-on-cash = (NOI − mortgage payments) ÷ cash invested (down payment + closing costs) – DSCR = NOI ÷ annual mortgage payments (lenders commonly want ≥ 1.20 on investor loans) The mortgage payment uses the standard amortization formula. The downside toggle re-runs everything with rent cut 10% and every expense raised 10% — this site’s standing stress test for any property, alongside asking whether it at least breaks even as a plain long-term rental. Excluded and stated on the page: income taxes and depreciation, appreciation, rent growth, and renovation costs.
Worked example — one property, every line shown
$220,000 purchase · $2,050/mo rent · 25% down · 7% / 30-yr loan · taxes $3,600/yr · insurance $1,500/yr · other $50/mo · vacancy 5% · maintenance 5% · management 8% · closing 2%: – Mortgage payment: $1,097.75/mo · Cash invested: $59,400 – Effective income: $23,370 · Total expenses: $8,738 · NOI: $14,632 – Cap rate 6.65% · Cash flow +$122/mo · Cash-on-cash 2.46% · DSCR 1.11 – Downside case: NOI $11,755 · cap 5.34% · cash flow −$118/mo · cash-on-cash −2.39% · DSCR 0.89
FAQs
What is a “good” cap rate? There’s no universal number — cap rates price risk and growth. Roughly: 4–5% is common in expensive coastal markets where buyers bet on appreciation; 6–8%+ appears in cheaper markets with slower growth. Compare a property’s cap rate to others in the same market, not to a national rule. Why is the cash flow so much smaller than the rent? Because the rent is revenue, not profit. In the worked example, $2,050 of rent becomes $122 of monthly cash flow after vacancy, $8,738 a year of expenses, and $13,173 a year of mortgage payments. Any analysis that skips lines is selling you something. What DSCR do lenders require? DSCR loans commonly look for 1.20–1.25 or higher; below 1.00 the property doesn’t cover its own debt payments. The worked example’s 1.11 would get a hard look from many lenders. Should I buy a property with negative cash flow? This site’s rule: only with eyes open — if the long-term-rental fallback doesn’t at least break even after every expense, you’re speculating on appreciation, and the analysis should say so in those words.
Disclaimer
Educational content only — not investment advice. Verify taxes, insurance quotes, HOA terms, and local rental rules (including any STR restrictions and permit requirements) for any specific property.
Sources: IRS Publication 527 (residential rental property), FRED MORTGAGE30US (Freddie Mac 30-year average) Figures last verified Report a wrong number