Return on investment for a rental property compares what it returns each year, from cash flow, principal paydown and appreciation, with the cash put in. The calculator shows cash-on-cash return, total return and the equity built over the holding period.
Calculate return on investment, cash-on-cash return, and cap rate for rental properties. Essential for investment analysis and real estate exam prep.
Total purchase price of the property
Cash down payment amount
Estimated closing costs and fees
Expected monthly rental income
Taxes, insurance, maintenance, etc.
Expected vacancy percentage
Input the purchase price, your down payment, and estimated closing costs.
Enter expected monthly rent, operating expenses, and vacancy rate.
Instantly see cash-on-cash return, cap rate, and monthly cash flow projections.
Measures the annual return on the actual cash you invest. A good target is 8-12%.
Measures property value relative to income. Typical range: 4-10% depending on market.
Quick metric to compare properties. Lower GRM generally indicates better value.
Analyzing the potential return on investment (ROI) is crucial before purchasing any rental property. Our free ROI calculator helps you evaluate investment opportunities by calculating key metrics like cash-on-cash return, cap rate, and gross rent multiplier. Whether you're a seasoned investor or just getting started, understanding these calculations is essential for making profitable investment decisions.
While both metrics measure investment performance, they serve different purposes. Cap rate measures the property's potential return independent of how you finance it, making it useful for comparing properties. Cash-on-cash return shows your actual return based on the cash you invest, accounting for leverage. When using financing, your cash-on-cash return is typically higher than cap rate because you're controlling more property with less of your own money.
One of the biggest mistakes new investors make is underestimating expenses. Beyond obvious costs like property taxes and insurance, you should budget for maintenance (typically 1-2% of property value annually), property management (8-10% of rent if using a manager), vacancy losses, and reserves for major repairs. Being conservative with your expense estimates helps ensure your actual returns match your projections.
Cap rate and gross rent multiplier calculations are frequently tested on real estate licensing exams. Understanding how to compute these values and interpret what they mean is essential for passing your exam and advising investor clients. Practice calculating these metrics with different scenarios to build confidence and speed for exam day.
Master real estate investment calculations with our practice exam questions.
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Key facts
Cash-on-cash return = annual pre-tax cash flow ÷ total cash invested. Total return adds the principal paid down and appreciation to the cash flow. Cash flow = NOI − annual debt service.
Cash-on-cash return of about 5.0% in year one, before the principal paydown of roughly $2,300 and any appreciation.
Cap rate describes the property on its own: NOI over price, with no loan. Return on investment describes the investor’s position: what the cash they put in earns, after the loan payment, sometimes including equity growth. Two buyers can see different ROI on the same building because they finance it differently.
It depends on the alternative uses of the cash and the risk of the property. Many investors want a cash-on-cash return above what a safe investment pays, and they weigh it with the principal paydown and appreciation the calculator shows, since a property with thin cash flow can still build equity quickly.
Last reviewed September 8, 2026 by the EstatePass editorial team. Formulas and program limits are checked against the published rules; figures on this page are arithmetic, not market statistics.
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