Rental Property ROI
Puts the advertised yield, the cap rate, cash-on-cash return, monthly cash flow and break-even occupancy for the same property side by side.
Runs entirely in your browser. Nothing you enter is uploaded.
Written and maintained by ReadoutKit / Takashi Yamazaki
How this works
What the advertised yield leaves out
The yield printed on a listing is almost always the gross yield, and the formula is as simple as it looks.
gross yield = annual rent at full occupancy ÷ purchase price
The useful exercise is listing what the formula omits: vacancy, non-payment, management, insurance, property tax, maintenance, turnover, leasing fees and closing costs. Every omitted item is an expense and never an income. A gross yield can therefore only err in one direction — too high.
cap rate = net operating income ÷ (price + closing costs)
Net operating income is effective rent minus operating expenses. On the defaults above — a $285,000 house, $9,000 in closing costs, $2,450 rent, 6% vacancy, $190 a month in management, $3,400 property tax and $2,200 of other annual costs — a 10.32% gross yield becomes a 6.72% cap rate. That 3.6 point gap is structural, not a negotiating position.
Vacancy never touches the gross yield
Everything else held constant, changing only the vacancy and credit loss assumption.
| Vacancy | Effective rent (yr) | NOI (yr) | Cap rate | Monthly CF |
|---|---|---|---|---|
| 0.0% | $29,400 | $21,520 | 7.3% | $442 |
| 5.0% | $27,930 | $20,050 | 6.8% | $320 |
| 8.0% | $27,048 | $19,168 | 6.5% | $246 |
| 10.0% | $26,460 | $18,580 | 6.3% | $197 |
| 15.0% | $24,990 | $17,110 | 5.8% | $75 |
| 20.0% | $23,520 | $15,640 | 5.3% | -$48 |
Between 0% and 20% vacancy, monthly cash flow moves from $442 in your pocket to $48 out of it — a $490 swing. Across the same column the gross yield never moves off 10.32%. Comparing listings on gross yield means that swing stays invisible until you own the place.
Vacancy is partly a variable you control: cut the rent and the unit fills. But that lever lowers the rent roll itself, so effective income falls either way. It is worth estimating honestly before you buy rather than discovering it in year two.
Leverage buys yield by selling resilience
The same property at the same 6.5% rate, varying only the down payment.
| Down | Loan | Monthly CF | Cash-on-cash | DSCR | Break-even occ. |
|---|---|---|---|---|---|
| 10.0% | $256,500 | $25 | 0.8% | 1 | 93.0% |
| 20.0% | $228,000 | $205 | 3.7% | 1.1 | 85.6% |
| 30.0% | $199,500 | $385 | 4.9% | 1.3 | 78.3% |
| 50.0% | $142,500 | $746 | 5.9% | 1.8 | 63.6% |
| 100.0% | $0 | $1,646 | 6.7% | — | 26.8% |
The usual claim is that less money down means a higher return on the money you did put down. This table says otherwise: 10% down returns 0.8% cash-on-cash, below the 3.7% at 20% down and the 4.9% at 30%. Debt service consumes the numerator before the smaller denominator can help. Leverage only multiplies a return that already clears the borrowing rate.
Read the last two columns alongside it. At 10% down, DSCR is 1.02 and break-even occupancy is 93% — one long turnover and the year is negative. At 30% down, DSCR is 1.31 and break-even is 78.3%, which absorbs the better part of three vacant months. Leverage is not a way to buy return; it is a trade of resilience for return.
Financing is not a property characteristic
Same building, same tenants, different mortgage rate.
| Rate | Payment | Monthly CF | Cash-on-cash | DSCR |
|---|---|---|---|---|
| 5.0% | $1,147/mo | $499 | 7.5% | 1.4 |
| 6.0% | $1,282/mo | $365 | 5.5% | 1.3 |
| 6.5% | $1,351/mo | $295 | 4.4% | 1.2 |
| 7.0% | $1,422/mo | $224 | 3.4% | 1.2 |
| 8.0% | $1,568/mo | $78 | 1.2% | 1 |
Three points of mortgage rate move monthly cash flow from $499 to $78 and cash-on-cash from 7.5% to 1.2%. Neither NOI nor the cap rate moves at all. That separation is the reason to keep both numbers: compare properties on the cap rate, then decide whether you can own this one on DSCR and cash flow.
Notice how thin the spread is at the default. A 6.72% cap rate against a 6.5% mortgage leaves 0.22 points, which is why the cash flow is $295 rather than something that feels like a return. When the spread is that narrow, the deal depends on rent growth rather than on the arithmetic you can verify today.
If you take one number away
Take break-even occupancy. At the defaults it is 81.9%: expenses and the mortgage consume 81.9% of a full rent roll and the rest is yours. Where a yield is a rate, this is a margin — it tells you directly how much can go wrong before the property costs you money. Roughly two months of vacancy a year, here.
Keeping that figure under 90% is what carries a rental through the events that are certain to happen on an uncertain schedule: a roof, a rate reset, an eviction. Above 90%, the property is only profitable in the version of the year where nothing goes wrong.
What this calculator deliberately leaves out
Depreciation and income tax. The land-to-building split, the recovery period, your entity structure and your other income all change the answer without saying anything about the property, so everything here stays pre-tax and comparable between deals.
Appreciation and sale proceeds, too. A full IRR that includes an exit is dominated by the exit price — the least knowable input in the model. Whether the property carries itself while you hold it is answerable today, without assuming anything about the future, and it comes first.
Capital expenditure is left to you, in the annual costs field. A roof, a furnace and a repaint arrive on a 10–20 year cycle rather than monthly; spreading a yearly reserve into that field keeps the ordinary months from looking better than they are. One percent of the purchase price per year is the usual starting reserve.
Common questions
- What is the difference between gross yield and cap rate?
- Gross yield is annual rent divided by purchase price, and it ignores vacancy, operating expenses and closing costs. The cap rate is net operating income divided by total investment, so those things are back in. Everything the gross yield leaves out is an expense, never an income, which means the gross number can only ever be too high. On the default property here, 10.32% gross becomes a 6.72% cap rate — a 3.6 point gap that no amount of negotiation closes.
- What is a good cap rate for a rental property?
- A cap rate means nothing on its own, because it deliberately excludes financing. The same 6.72% property throws off $499 a month at a 5% mortgage rate and $78 a month at 8%. Judge it two ways instead: how far the cap rate sits above your borrowing rate (the yield spread), and what your break-even occupancy is. A property whose cap rate is below its mortgage rate loses more money the more you borrow.
- How much vacancy should I assume?
- Five percent is the common starting assumption; older buildings and thin rental markets run 10–20%. What matters more is that this input does not touch the gross yield at all. Moving vacancy from 0% to 20% on the property above swings monthly cash flow from +$442 to −$48 and the cap rate from 7.3% to 5.3%, while the gross yield sits at 10.32% throughout. If you compare listings on gross yield, vacancy risk is never priced in.
- What does cash-on-cash return measure?
- Annual pre-tax cash flow divided by the cash you actually put in — down payment plus closing costs. It answers a different question from the cap rate: not how productive the building is, but how productive your money is. On the default property it runs 3.7% at 20% down, 5.9% at 50% down and 6.7% all cash. Note that it does not rise as leverage rises: at 10% down it falls to 0.8%, because debt service eats the cash flow that sits in the numerator.
- What DSCR do lenders want?
- DSCR is net operating income divided by annual debt service, so 1.0 means the property exactly covers its own mortgage. Lenders on DSCR loans typically want 1.20–1.25, and the default here is 1.22. Below 1.0 the rent cannot service the debt even at full occupancy, and the shortfall comes out of your other income every month. The ratio moves sharply with the down payment: 1.02 at 10% down, 1.31 at 30% down.
- What is break-even occupancy?
- Operating expenses plus debt service, divided by the full rent roll — the share of the year the property must be rented to avoid costing you money. The default works out to 81.9%, so roughly two months of vacancy a year is survivable. It is calculated independently of your vacancy assumption, because feeding the assumption into its own test makes the answer circular. It is the most practical single number here: 93% break-even (what 10% down produces) means one bad turnover puts the year in the red.
- Does this include depreciation and taxes?
- No. Everything here is pre-tax. Depreciation depends on the land-to-building split, the recovery period, whether you hold the property personally or in an entity, and what other income you have — none of which say anything about the property itself. Start from the pre-tax cash flow shown here, subtract depreciation to get taxable income, then apply your own rate.
- Is anything I type sent anywhere?
- No. The whole calculation runs in your browser in JavaScript. Nothing is uploaded, stored or logged, and no agent, lender or listing site receives your numbers. Most rental analysis tools put a lead form in front of the result. There is none here.
Sources
The formulas and rates used by this tool come from the documents below. Rules change; when a figure here disagrees with the source, the source is right.
Figures checked against the sources below on September 2, 2026.
- Publication 527, Residential Rental PropertyInternal Revenue Service
- Housing Vacancies and Homeownership (CPS/HVS)U.S. Census Bureau