Rental Property ROI Calculator

Cap rate vs. cash-on-cash vs. GRM — what each number tells you

No single metric captures a rental deal. Each of the numbers this calculator produces answers a different question, and experienced buyers read them together.

Cash flow: can the property pay its own bills?

Monthly cash flow is rent plus other income, minus everything — operating expenses and the mortgage payment. Positive cash flow means the property carries itself; negative means you fund the gap from your own pocket every month. Be honest with the expense inputs: budgeting a percentage of rent for maintenance and vacancy, even in a good year, is what separates a realistic projection from a hopeful one.

Cap rate: how does the property compare to others?

Capitalization rate divides annual net operating income — income minus operating expenses, deliberately excluding the mortgage — by the purchase price. Because it ignores financing, it lets you compare a property against others regardless of how each buyer would pay for it. Cap rates are a market signal as much as a property metric: they compress in expensive, low-risk markets and widen where risk or management burden is higher.

Cash-on-cash return: what does your money earn?

Cash-on-cash divides annual cash flow (after the mortgage) by the cash you actually invested — down payment plus closing costs. It is the number most comparable to the yield on other places you could put the same money. Leverage cuts both ways here: a bigger loan can raise cash-on-cash when the deal performs and deepen losses when it does not.

Gross rent multiplier: the quick screen

GRM is purchase price divided by gross annual rent — no expenses at all. It is the fastest way to rank a list of candidate properties before digging in, but because it ignores costs entirely, a low GRM on a high-expense building can be a trap. Use it to shortlist, never to decide.

A word on rules of thumb

You will see shorthand rules quoted online — target cap rates, percent-of-price rent screens, and the like. Treat them as conversation starters, not underwriting. What counts as a strong number in one metro is unrealistic in another, and both change with interest rates and local supply. Compare any deal against recent sales and actual rents in its own submarket. If you buy, accurate books make next year's analysis easier — income and expense reports and clean rent payment records turn guesswork into data.

Estimates for education only — not investment, legal, or tax advice. Consult a licensed professional before making investment decisions.