Rental Property ROI Calculator: Run Your Numbers Before You Offer

Introduction

Most rental deals fail in the spreadsheet before they fail in reality — usually because the spreadsheet was missing two or three expense lines that do not bill monthly. This calculator includes them by default.

TL;DR: Rent minus mortgage is not cash flow. Management, maintenance, capital reserves and vacancy are real costs whether or not you paid them this month. Run every deal with them included, then run it again with a downside case.

What each output means

Monthly cash flow

Everything that comes in, minus everything that goes out, including the reserves you set aside rather than spend. This is the number that determines whether the property is solvent month to month.

If cash flow is positive only because you left out capital reserves or management, it is not positive.

Cash-on-cash return

Annual pre-tax cash flow divided by the cash you actually put in — down payment, closing costs, and upfront repairs. It answers the question that matters when comparing investments: what is my money earning?

Unlike cap rate, it accounts for financing. Two identical properties bought with different leverage have the same cap rate and very different cash-on-cash returns.

Cap rate

Net operating income divided by purchase price, ignoring financing entirely. Because it excludes the loan, it compares properties rather than deals, which makes it the right tool for comparing one building to another and the wrong tool for judging whether your particular purchase works.

Note that NOI excludes debt service but includes all operating expenses — including a management fee, whether or not you self-manage.

DSCR

Net operating income divided by annual debt service. Below 1.0, the property does not cover its own loan payment. Lenders underwriting DSCR loans typically want to see 1.20 or better, and the ratio is worth watching regardless of how you finance — it measures how much room the property has before a rent decline makes it insolvent.

The expenses beginners leave out

The calculator defaults to percentages rather than dollar amounts for four lines, because those four are the ones most often set to zero:

Property management (default 8%). Include it even if you self-manage. Your time has value, and if you ever stop self-managing — or want to sell to someone who will not — the deal has to survive the cost.

Maintenance (default 7%). Not capital replacement; ordinary repairs. Older properties run higher.

Capital reserve (default 7%). Roof, HVAC, water heater, flooring. These are not contingencies, they are certainties on a long enough timeline, and the reserve is how you pay for them without a capital call on yourself.

Vacancy (default 6%). Roughly three weeks a year. Even excellent tenants eventually move, and turnover costs both lost rent and make-ready expense.

Two more deserve attention because the seller's numbers understate them:

Property taxes. In reassessment-on-sale jurisdictions your tax bill can step up sharply the year after purchase. The seller's trailing statement reflects their basis, not yours — see the reassessment risk scorecard.

Insurance. Get a quote in your own name rather than inheriting the seller's premium. Rates have moved significantly in coastal and wildfire-exposed markets.

How to stress test

A single set of inputs tells you what happens if everything goes as planned. It never does. Run each deal three times:

Scenario	What to change
Base	Your realistic expectations
Downside	Rent −10%, vacancy 10%, maintenance +50%
Stress	Downside, plus taxes and insurance +25%

A deal that stays cash-flow positive through the downside case is genuinely resilient. One that survives the base case only is a bet on conditions holding.

Pay particular attention to DSCR in the stress case. That is where a refinance or a lender covenant would come under pressure, and it is the number that determines whether a rough year is inconvenient or forced.

What the calculator does not include

Deliberate omissions, because they are either individual to you or too variable to default:

• Income tax and depreciation. Depreciation frequently turns positive cash flow into a paper loss, which is a genuine return and depends entirely on your tax position. See the landlord's tax deduction guide.
• Appreciation. Real, and not something to underwrite. If a deal needs appreciation to work, it is a forecast rather than an investment.
• Principal paydown. A meaningful component of total return that never appears in cash flow, because the tenant is funding it.
• Loan costs and points. Add these to closing costs where they apply.

Together those mean total return is usually higher than the cash-on-cash figure shown — but cash flow is the number that keeps you solvent, and solvency is what lets you hold long enough to collect the rest.

FAQ

What is a good cash-on-cash return?

There is no universal threshold, because it depends on market, property class and your alternatives. A more useful test than a target is a floor: it should beat your other options after honest expenses, in the downside case as well as the base case.

Why does the calculator include management if I self-manage?

Because your time is a real cost, and because a deal that only works with free labour is not a deal that can be sold or delegated. Include it, and treat any management fee you save as a return on your own effort rather than as property performance.

Should the capital reserve be a percentage or a dollar amount?

A percentage is a reasonable default for screening. For a specific property, estimate it from actual component ages — a roof with five years left and a twenty-year-old furnace justify a much larger reserve than the default.

Does this work for multifamily?

Yes for small multifamily — enter total rent and total expenses. Larger commercial deals need per-unit detail, real vacancy history and a full operating statement rather than percentage defaults.

What about BRRRR deals?

Run the numbers twice: once at purchase with your actual cash in, and again after refinance with the new loan and the cash you left in the deal. The post-refinance cash-on-cash is the number that matters, and it is why BRRRR can produce very high returns — or divide-by-zero ones when no cash remains in the deal.

Conclusion

The arithmetic in a rental deal is not complicated. What separates good underwriting from bad is whether the expense lines that do not bill monthly are in the model, and whether the deal was tested against a case where things go worse than expected.

Run every property through the same inputs, stress it, and compare on identical assumptions. The deals that survive that treatment are the ones worth pursuing — and the discipline matters more than the calculator.

Next: Rental Properties 101 for how the four sources of return fit together, and the due diligence checklist for verifying the numbers before you close.