Cap Rate (Capitalization Rate) measures a property's unlevered return — its profitability without considering financing. It is calculated as Net Operating Income ÷ Purchase Price. It helps you compare the quality of different properties regardless of how they are financed.

Cash on Cash ROI measures your specific return based on the cash you invested. It factors in your mortgage, down payment, and closing costs. Formula: Annual Cash Flow ÷ Total Cash Invested × 100.

Most investors use both: Cap Rate to evaluate the deal quality, and Cash on Cash ROI to evaluate their personal return.

A good Cap Rate for rental property typically ranges from 5% to 10%, depending on market and property type:

• 4% – 6%: Common in major metros (NYC, San Francisco, LA) with higher property values and lower risk
• 6% – 8%: Solid returns in secondary markets and growing cities
• 8% – 10%+: Achievable in smaller markets, often with higher risk or management intensity

According to CBRE research, the national average Cap Rate for multifamily properties was approximately 5.5% in 2025. A higher Cap Rate indicates higher potential returns but may also signal higher risk.

Most professional real estate investors target a Cash on Cash return of 8% to 12%.

• 8% – 10%: Considered a solid, safe return in stable, appreciating markets
• 12%+: Excellent return, often found in riskier markets or properties needing renovation (BRRRR strategy)
• Below 6%: Generally considered low unless the property is in a high-appreciation area where equity growth compensates for lower cash flow

For comparison, the S&P 500 has historically returned about 10% annually, so many investors set this as their minimum benchmark for rental property returns.

Net Operating Income (NOI) is calculated as: Gross Rental Income − Operating Expenses.

Gross rental income includes rent, parking fees, and other property income, adjusted for vacancy. Operating expenses include:

• Property taxes
• Insurance
• Maintenance and repairs
• Property management fees
• HOA or condo fees
• Utilities paid by the landlord

NOI does not include mortgage payments, capital expenditures, or income taxes.

The 1% rule is a quick screening guideline stating that a rental property's monthly rent should be at least 1% of its purchase price. For example, a $200,000 property should rent for at least $2,000 per month.

Properties meeting the 1% rule are more likely to generate positive cash flow. However, this is a rough filter — not a replacement for full analysis:

• In expensive coastal markets, very few properties meet the 1% rule
• In affordable Midwest markets, some properties exceed it
• Always run a full cash flow analysis using a real estate investment calculator before making a buying decision

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It is a real estate investment strategy where an investor:

1. Buys a distressed property below market value
2. Rehabs (renovates) it to increase its value
3. Rents it out to tenants for cash flow
4. Refinances based on the new higher appraised value to recover initial investment
5. Repeats the process with the recovered capital

The goal is to build a portfolio of rental properties while recycling the same capital. A successful BRRRR deal recovers 75% to 100% of the investor's cash investment through refinancing.

Use the BRRRR Calculator to analyze whether a deal works for this strategy.

House flipping profit is calculated as:

• ARV (After Repair Value): What the property is worth after renovation
• Holding costs: Mortgage, insurance, utilities, and taxes during renovation
• Selling costs: Agent commissions (5%–6%), closing costs, and transfer taxes

Most experienced flippers target a minimum profit margin of 10% to 15% of ARV, or follow the 70% rule: never pay more than 70% of ARV minus repair costs. Use the Flip Calculator to automate this analysis.

Investment properties typically require a down payment of 15% to 25% of the purchase price:

• Conventional loans: 20% to 25% down for investment properties
• Portfolio lenders: Some offer 15% down for well-qualified borrowers
• FHA loans (3.5% down) and VA loans (0% down) are only available for owner-occupied properties, not pure investments

Include these operating expenses when analyzing a rental property:

• Property taxes: 0.5% to 2.5% of property value annually (varies by location)
• Property insurance: $800 to $2,000+ per year
• Maintenance & repairs: Budget 5% to 10% of gross rent
• Vacancy allowance: 5% to 10% of gross rent
• Property management: 8% to 10% of rent if hiring a manager
• HOA/condo fees: If applicable
• Landlord-paid utilities
• Lawn care / snow removal

Also factor in mortgage payments, closing costs in your initial cash invested, and a capital expenditure reserve (5%–10% of rent) for major replacements like roofs, HVAC, and water heaters.

Monthly mortgage payments are calculated using the standard amortization formula:

• M = monthly payment
• P = loan principal (purchase price − down payment)
• r = monthly interest rate (annual rate ÷ 12)
• n = total number of payments (years × 12)

A conservative vacancy rate for rental property analysis is 5% to 10% of gross rental income.

• The U.S. Census Bureau reported the national rental vacancy rate at approximately 6.4% in Q4 2025
• In high-demand urban markets, vacancy may be as low as 3%–5%
• In secondary markets or areas with high turnover, use 8%–10%
• For single-family rentals, use at least 5% even in strong markets to account for turnover time between tenants

It is better to overestimate vacancy and be pleasantly surprised than to underestimate it and face negative cash flow.

Yes, the Real Estate Investment Calculator is completely free to use with no signup required. All core features are available at no cost:

• ROI and Cap Rate calculation
• Cash flow projections
• Mortgage calculator with full amortization schedule
• BRRRR strategy calculator
• House flip calculator
• Live mortgage rates tracker
• Save up to 3 properties

The optional Pro upgrade ($19 one-time, not a subscription) adds portfolio comparison for unlimited saved properties and PDF report exports.

Yes. By default, the calculator estimates closing costs at approximately $5,000 and adds this to your total cash invested. This ensures your ROI and Cash on Cash return calculations are realistic, accounting for the actual money spent upfront. You can adjust the closing cost amount to match your specific deal.

No! The Pro plan is a one-time payment of $19. You get lifetime access to the Portfolio Comparison tool, unlimited property saves, and PDF exports. There are no recurring monthly fees.