Evaluating Rental Property Returns
Return on Investment (ROI) for rental property accounts for both cash flow and equity appreciation. This calculator focuses on cash-on-cash return — annual net rental income divided by total cash invested (down payment + closing costs + initial repairs). This metric tells you the cash yield on your out-of-pocket investment, independent of financing leverage.
A cash-on-cash return above 8–10% is generally considered good for residential rental property, though this varies by market. Factor in vacancy rate (typically 5–10%), property management (8–12% of gross rent), maintenance (1% of property value per year), and insurance. Don't forget to subtract mortgage P&I from cash flow if the property is financed.