Compute gross and net rental yield after vacancy and operating expenses.
Investment Details
Enter the deal parameters to see if the numbers stack up.
Understanding the Metrics
Which number truly matters?
Cash on Cash Return
The most practical metric for investors using leverage. It measures your annual cash profit divided by the actual cash you put into the deal. (Goal: >8-10%)
Cap Rate (Capitalization Rate)
Measures the property's raw profitability without considering your loan. It allows you to compare the asset quality itself against other properties in different locations. (Goal: 5-8%)
The Math Behind It
NOI = (Rent - Vacancy) - (Tax + Ins + HOA + Mgmt + Maint)
Cap Rate = (NOI / Purchase Price) × 100
Cash on Cash = ((NOI - Debt Service) / Total Invested Cash) × 100
We perform a full profit and loss (P&L) calculation. We start with Gross Potential Income, subtract Vacancy to get Effective Gross Income. Then we subtract all Operating Expenses to find NOI. Finally, subtract Mortgage Payments to find Cash Flow.
Before entering detailed data, investors often use the 1% Rule. It states that the monthly rent should be at least 1% of the purchase price. This is a heuristic, not a law, but it saves time filtering deal flow.
Example: A $200,000 house should rent for $2,000/month.
Why? If it rents for less (e.g., $1,200, or 0.6%), it is very difficult to cover the mortgage, taxes, insurance, and maintenance and still have positive cash flow.
In today's high-interest-rate environment, the 1% rule is becoming harder to find in turnkey markets. Investors may need to look for value-add opportunities or accept slightly lower yields in exchange for appreciation.
Cash on Cash Return: Your True Scorecard
This is the most critical metric for most investors using leverage. It answers: "For every dollar I put in, how many cents do I get back each year?"
Unlike "ROI" which might include vague appreciation estimates, Cash on Cash is tangible. It uses your actual Cash Invested (Down payment + Closing Costs + Rehab) and your actual Cash Flow (Rent - Expenses - Mortgage).
Target Rates
Historically, stocks return 7-10% (nominal). Therefore, real estate investors typically aim for 8-12% Cash on Cash to justify the extra work (tenants, toilets, trash) of owning property. If your CoC return is 3%, you might be better off in a high-yield savings account (risk-free).
Gross Yield vs. Net Yield vs. IRR
Real estate has an alphabet soup of metrics. Here is how they differ:
Gross Yield:(Annual Rent / Price). It is the crudest measure. It ignores expenses. Useful only for very high-level comparison between neighborhoods.
Net Yield (Cap Rate):(NOI / Price). This measures the property's efficiency. It accounts for taxes, insurance, and maintenance but ignores debt. It allows you to compare a deal in Texas vs. Ohio.
Cash on Cash:(Cash Flow / Cash Invested). This measures your efficiency. It accounts for debt. This is what you pay your bills with.
IRR (Internal Rate of Return): This is the total return over the life of the investment, including cash flow, principal paydown, and appreciation upon sale. It creates a "time-weighted" return.
Cap Rate (Capitalization Rate) Deep Dive
Cap rate measures the property, not the investor's financing. It is simply NOI / Price.
Think of it as the "risk premium" of a neighborhood.
Low Cap Rate (3-4%): Class A, prime locations (e.g., Beverly Hills). Low risk, high appreciation, low cash flow.
High Cap Rate (8-12%): Class C/D, rougher neighborhoods. Higher risk of vacancy/eviction, low appreciation, high theoretical cash flow (if they pay).
Pro Tip: Interest rates affect Cap Rates. If you borrow at 7% to buy a 5% Cap Rate property, you have "Negative Leverage"—you lose money on every dollar borrowed.
The Profit Killers: Expenses You Forgot
Many beginners assume 100% occupancy and zero repairs. This is why they fail. The "50% Rule" suggests that, over time, 50% of your gross rent will go to operating expenses (not including the mortgage). Watch out for:
Vacancy (5-8%): You WILL have empty months between tenants. Even in hot markets, turnover takes time (painting, cleaning, showing). Budget 8.3% (1 month per year) to be safe.
Maintenance (5-10%): Roofs leak. Heaters die. Carpet wears out. You must set aside ~5-10% of gross rent for these inevitable costs. CapEx (Capital Expenditures) references the big ticket items (Roof, HVAC) that happen every 15 years.
Management (8-10%): Even if you manage it yourself, "charge" yourself this fee in calculations. Your time is not free. If you don't factor this in, you are just buying yourself a low-paying part-time job.
Utilities: In multifamily, landlords often pay water/sewer/trash. In single-family, tenants usually pay. Know the local norms.
Short-Term vs. Long-Term Rentals
The rise of Airbnb has changed the yield game. Short-term rentals (STRs) can often generate 2-3x the gross revenue of a long-term rental.
However, expenses are also higher:
Vacancy is higher and more seasonal.
Utilities are paid by the landlord.
Cleaning/Turnover costs are massive.
Furnishing is a large upfront CapEx.
Use this calculator for Long-Term rentals. For STRs, you need to adjust the "Vacancy" and "Management" (often 20-30%) inputs significantly.
Frequently Asked Questions
Common questions about rental profitability
Can I count my principal payment as profit?
Technically, yes (it enters your Net Worth), but it is not Cash Flow. You cannot spend principal paydown at the grocery store. Cash on Cash typically looks at liquid cash only. If you include principal paydown + appreciation, you are calculating "Total Return".
What is a "good" expense ratio?
The "50% Rule" suggests that over time, operating expenses (taxes, insurance, repairs, vacancy) will eat up 50% of your gross rent. If your ratio is significantly lower (e.g., 20%), you are likely underestimating costs, unless the tenant pays absolutely everything (Triple Net Lease).
What is the "BRRRR" method?
Buy, Rehab, Rent, Refinance, Repeat. It involves buying a fixer-upper, adding value (forced appreciation), and then refinancing to pull your original cash back out. This calculator helps with the "Rent" and "Refinance" steps by ensuring the property cash flows after the new loan is placed.
Should I buy for Cash Flow or Appreciation?
New investors should prioritize Cash Flow. It keeps you safe during downturns. Appreciation is the icing on the cake, but you can't eat icing for dinner if the mortgage can't be paid and the bank forecloses. Experienced investors with deep pockets often play the appreciation game (buying break-even properties in prime locations).
How do financing terms affect my yield?
Lower interest rates increase cash flow. Longer amortization (30yr vs 15yr) lowers monthly payments, boosting cash flow. Higher down payments lower risk but lower your Cash on Cash return (less leverage). Interest-only loans maximize cash flow but build no equity.
What is DSCR?
Debt Service Coverage Ratio. It compares NOI to Debt Service. Lenders want to see a DSCR > 1.25, meaning the property generates 25% more income than the mortgage payment. If DSCR < 1, the property loses money.
Why is my Cash-on-Cash infinite?
If you have $0 invested (e.g., you got a 100% loan or seller financing covers the down payment), your divisor is 0. This is an "Infinite Return." It's the holy grail of investing, but rare.
Usage of this Calculator
Who is this tool for?
Who Should Use This?
Buy & Hold InvestorsAnalyzing rental properties for long-term portfolio addition.
House HackersEvaluating if renting out a portion of their home covers the mortgage.
Limitations
Tax Benefits: This calculator does not model depreciation tax shields or income tax brackets, which often improve the final return.
Appreciation: This is a snapshot of Year 1 performance. It does not project future rent increases or property value growth.
Summary
Successful real estate investing creates a gap between income and expenses. This calculator forces you to honestly account for all expenses—including the invisible ones like vacancy and maintenance—to reveal the true profitability of a potential deal.
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Compute gross and net rental yield after vacancy and operating expenses.
How to use Rental Yield Calculator
Step-by-step guide to using the Rental Yield Calculator:
Enter your values. Input the required values in the calculator form
Calculate. The calculator will automatically compute and display your results
Review results. Review the calculated results and any additional information provided
Frequently asked questions
How do I use the Rental Yield Calculator?
Simply enter your values in the input fields and the calculator will automatically compute the results. The Rental Yield Calculator is designed to be user-friendly and provide instant calculations.
Is the Rental Yield Calculator free to use?
Yes, the Rental Yield Calculator is completely free to use. No registration or payment is required.
Can I use this calculator on mobile devices?
Yes, the Rental Yield Calculator is fully responsive and works perfectly on mobile phones, tablets, and desktop computers.
Are the results from Rental Yield Calculator accurate?
Yes, our calculators use standard formulas and are regularly tested for accuracy. However, results should be used for informational purposes and not as a substitute for professional advice.