How the math works
How to use it
- Use a real rent, not an asking rent. What the unit next door rented for beats what this one is listed at.
- Do not set vacancy to zero. One empty month a year is about 8%, and every property has turnover eventually.
- Put a number in management even if you plan to self-manage. If the deal only works because you are working for free, that is worth knowing before you buy it, not after.
- The capital reserve is the one people delete to make a deal work. Roofs, furnaces and water heaters do not fail monthly, but they fail, and a reserve you did not spend this year is not profit.
A worked example
A $240,000 house, 25% down at 6.69% over 30 years, $6,000 closing and $4,000 of repairs, renting at $2,200. Gross rent is $26,400 and 5% vacancy takes it to $25,080. Taxes, insurance and 24% for maintenance, reserves and management come to $11,336, so NOI is $13,744 and the cap rate is 5.73%. The mortgage is $1,160 a month, which leaves cash flow of −$15 a month on $70,000 of cash in — coverage of 0.99×.
That is the honest version. Delete the maintenance, reserve and management lines, as a lot of listing math does, and the same deal shows $161 a month instead.
Where this sits in the Financial Literacy resource
A calculator tells you where you are. It does not tell you what to do next, and a number without a plan behind it tends to produce anxiety rather than progress. These stages are free, need no account, and cover the decision this calculator is measuring.
Common questions
What is the difference between cap rate and cash-on-cash return?
Cap rate is net operating income divided by price, before any financing. It describes the building, and it lets you compare two properties bought on different terms. Cash-on-cash is your cash flow after the mortgage, divided by the cash you actually put in. It describes your deal. The same building has one cap rate and as many cash-on-cash returns as there are ways to finance it.
Does the 1% rule still work?
As a screen, sometimes. As a standard, no — it stopped clearing in most of the country years ago, and it was always a habit rather than a rule. It is useful for deciding which listings deserve a second hour. It is not useful for deciding what to buy, and a property that clears it can still lose money once taxes and reserves are in.
Why is there no benchmark for a good cap rate?
Because it is entirely local and the datasets that would tell you honestly are commercial. A 5% cap can be excellent in one metro and poor in another, and anyone publishing a single national "good" number is guessing. Compare against other properties you can actually see, in the same market, on the same day.
How much should I set aside for maintenance and capital reserves?
The figures people use are conventions, not measurements — commonly around 5–10% of rent for each. What matters more than the exact percentage is that both are in the calculation at all. An older property with original systems needs more; a new build needs less at first and more later.
Should I include my own labor if I self-manage?
Put the management percentage in anyway. You can choose to keep the money, but you should see what the job is worth before you decide to do it for nothing. A deal that only works while you are the unpaid property manager is a job you bought, not an investment.
What this calculator is not
It is an educational model, not a projection and certainly not advice. It knows nothing about your income, your state, your debts or your benefits status, and it ignores taxes and fees unless the page says otherwise. If you receive SSI or SSDI some of this math works differently and getting it wrong can cost you eligibility — start with the Disability Wealth Guide instead. Our sourcing and correction policy is on the editorial standards page.
Nothing here is stored. Every calculation runs in your browser. No numbers are transmitted, logged or saved to any server, and no account is required. Close the tab and it is gone.