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Rental Property ROI Calculator
Free rental property ROI calculator. Enter price, rent, HOA, property tax, insurance, and vacancy to get gross yield and net cap rate.
A $300,000 rental bringing in $2,000 a month has a gross yield of 8.00% and a net yield of 3.93%. The gap is $10,200 a year in property tax, insurance, HOA dues and repairs, plus one month with nobody living there. Listings quote the gross number because it is the prettier one. Put your own figures in below and you get both, plus the years the place takes to pay for itself.
How do you calculate ROI on a rental property?
Gross yield divides twelve months of rent by the purchase price. At $2,000 a month on a $300,000 house that is $24,000 over $300,000, or 8.00%. Nothing else goes into it, which is exactly why it looks so good.
Net yield divides the money you actually keep. Take out the year’s operating costs and the months the unit sat empty and the example leaves $11,800, or 3.93%. Same house. Four points of difference.
The second number is the one you can hold up against anything else you might do with $300,000. Gross yield cannot be compared to a bond or an index fund, because neither sends you a tax bill.
| Line | Per year | Yield points it removes |
|---|---|---|
| Rent collected, 12 months | $24,000 | gross yield 8.00% |
| One month vacant | −$2,000 | 0.67 |
| HOA dues, $150 a month | −$1,800 | 0.60 |
| Property tax | −$3,600 | 1.20 |
| Insurance | −$1,800 | 0.60 |
| Maintenance and repairs | −$3,000 | 1.00 |
| What you keep | $11,800 | net yield 3.93% |
Gross rental yield vs. cap rate: what is the difference?
Gross yield uses rent before any costs. Cap rate uses net operating income, which is rent minus the operating costs, divided by the price. The net yield this calculator shows is the cap rate, with one caveat worth knowing about.
A broker’s cap rate usually assumes professional management, and there is no separate field for it here. Property managers run 8% to 10% of collected rent, so on $22,000 collected that is about $1,760. Add it to the maintenance field. In the example that moves net yield from 3.93% to 3.35% and pushes break-even from 25.4 years to 29.9.
One empty month costs 8.33% of the year’s rent. It removes 0.67 points of yield, more than the entire insurance premium here. First-time landlords leave this field at zero, and it often decides whether the deal beats a savings account.
What is a good cap rate for a rental property?
There is no single threshold, and anyone who gives you one is selling something. The honest benchmark is what the same money earns without you screening tenants, replacing a water heater on a Sunday or waiting two months to sell.
That benchmark moves with interest rates. When Treasuries and money market funds pay well, a 3.93% net yield on an illiquid asset with a landlord’s workload attached is weak, and it only works if appreciation carries the deal. When safe rates sit near zero, the same 3.93% looks fine.
Location changes the answer more than people expect, and property tax is the biggest reason. Run the same house at a 0.5% effective tax rate and net yield is 4.63%. At 2.2%, normal in parts of New Jersey, Illinois and Texas, it drops to 2.93%. A 1.70 point swing from the tax bill alone, on identical rent and price.
How much should you set aside for vacancy and maintenance?
One vacant month a year is the standard assumption, generous in a tight market and optimistic in a soft one. Setting the field to zero raises net yield to 4.60% and cuts break-even to 21.7 years, which shows how much of the return rides on never having a gap between tenants.
For maintenance the usual rule of thumb is 1% of property value a year, the $3,000 in the default. Older houses eat more. A newer build eats less for a while, then catches up when the roof and the HVAC come due together.
A free sanity check: the 1% rule says monthly rent should be at least 1% of the price. This one rents for 0.667%, so it fails. Plenty of properties in expensive metros do. It is a flag, not a verdict.
What this calculator leaves out
Appreciation is not here, and for many owners it is most of the return. A property yielding 3.93% in cash while gaining value beats one yielding 6% in a flat market. You do not see that part until you sell.
Financing is not here either. This measures what the building produces, not how you paid for it. If you want cash-on-cash return with the loan in the math, DealCheck and the BiggerPockets calculators handle amortization and closing costs properly, and we do not. Same for a portfolio: past a handful of doors you want real bookkeeping software, not a web form.
Taxes are the third omission and they cut both ways. Rental income is taxable, which lowers your real return. Depreciation works the other way: residential rental property writes off over 27.5 years, so a $300,000 purchase with roughly $240,000 of building value gives about $8,727 a year of paper deduction against cash you did receive. Land does not depreciate, and the IRS recaptures the deduction at sale.
For the same yardstick on something simpler, the compound interest calculator shows what that down payment does at a fixed rate, with no tenants involved.
Tracking the real numbers after you buy
Every figure above is an estimate until the property has a full year behind it. The gap between the projected 3.93% and the real one is usually small repairs nobody wrote down, so log costs as they happen instead of reconstructing them next April.
AI Money is built for that part. Send an expense over WhatsApp, say it out loud, or photograph the hardware store receipt, and it lands in a category you can filter later. Android reads your bank’s transaction texts; iPhone picks up Apple Pay through Shortcuts. Budgets, savings pockets, debts with real interest and multi-currency are there too, and the ledger exports to PDF or CSV. The free plan does not expire; Pro is $3.99 a month or $32.99 a year.
Two things it does not do. It does not connect to bank accounts, so nothing imports from a login, and it does not split bills between friends. Your ledger stays on the phone, though whatever you send the assistant as text, audio or photo is processed on the server.
Frequently asked questions
Gross yield is twelve months of rent divided by the price: $24,000 over $300,000, or 8.00%. Net yield subtracts operating costs and vacant months first. In the example $10,200 of costs and one empty month leave $11,800, which is 3.93%, and the place pays for itself in 25.4 years.
Gross yield uses rent before costs, so it ignores property tax, insurance, HOA dues, repairs and vacancy. It is what listings advertise. Cap rate divides net operating income by the price, which is the net yield shown here. A broker’s cap rate usually assumes a property manager, so add 8% to 10% of collected rent to the maintenance field if you will hire one.
There is no fixed number. The right benchmark is what the same money earns somewhere passive and liquid, so when short-term rates are high a 3.93% net yield on a property you manage yourself is a poor trade unless you expect appreciation. The same house yields 4.63% at a 0.5% property tax rate and 2.93% at 2.2%.
One month a year is the standard assumption. A single empty month costs 8.33% of the year’s rent, or 0.67 points of yield, more than the whole insurance premium here. Setting vacancy to zero lifts the example to 4.60% and shortens break-even from 25.4 years to 21.7.
No. It measures what the property produces regardless of how you financed it, which is what lets you compare two properties fairly. For cash-on-cash return with the loan payment and closing costs included, use a tool built for financed deals such as DealCheck or the BiggerPockets calculators. Appreciation is excluded too.
Yes. You report rent received and deduct operating expenses on Schedule E of Form 1040, plus depreciation spread over 27.5 years on the building value only, never the land. On a $300,000 purchase with about $240,000 of building that is roughly $8,727 a year. The IRS recaptures it when you sell; Publication 527 has the rules.
- Compound interest calculator
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- IRS Publication 527: Residential Rental Property
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Updated August 23, 2026
