The Rental Property Calculator estimates the return on a rental property investment, including IRR, cap rate, cash flow and cash-on-cash return over the holding period.
IRR over 20 years: 15.35%
| Internal rate of return (IRR) | 15.35% |
| Cap rate (year 1) | 8.05% |
| Cash flow (year 1) | $4,588.63/yr |
| Cash-on-cash return (year 1) | 6.95% |
| Monthly mortgage payment | $959.28 |
| Total cash invested | $66,000.00 |
| Sale value after 20 years | $469,588.92 |
Rental property earns money in two ways: rent that exceeds the costs of owning (cash flow) and growth in the property's value (appreciation). A mortgage magnifies both the gains and the risks. Careful numbers before buying separate good deals from money pits.
Cap rate = first-year net operating income ÷ price; it ignores financing. Cash-on-cash return = first-year cash flow after the mortgage ÷ cash invested. IRR combines every year's cash flow and the sale proceeds into one annual rate and is the best overall measure of a leveraged investment held for years.
Worked example (defaults): a $200,000 purchase with 20% down, $20,000 of repairs, $2,000 rent and 3% yearly growth, sold after 20 years. The calculator shows the yearly cash flow and an IRR combining rents and the sale.
Budget realistically for vacancy (5–10%), maintenance (1% of value a year is a common rule), property management (8–12% of rent if you hire one), insurance, taxes, capital expenses such as roofs and HVAC, and selling costs (often 6–8%).
What is a good cash-on-cash return? Many investors look for 8% or more.
What is the 1% rule? Monthly rent at least 1% of the price, a rough screen only.
Are rental profits taxed? Yes, but depreciation and expenses reduce taxable income.