Rental yield calculator

The three returns every rental investor should know

A rental property produces three different returns, and the headline number a seller advertises is rarely the one that matters most. Knowing the difference between gross yield, cap rate, and cash-on-cash return is the difference between buying a profitable rental and buying a money pit dressed up as a deal.

• Gross yield = annual rent ÷ purchase price. Ignores every cost. Useful only for quick sorting between candidates, never for deciding whether a deal is actually good.
• Cap rate = net operating income ÷ purchase price. Includes all operating costs (taxes, insurance, maintenance, management, vacancy) but ignores financing. This is what commercial real estate uses to compare properties and is the fairest apples-to-apples metric across different ownership structures.
• Cash-on-cash return = annual cash flow after debt service ÷ down payment. Includes your specific financing terms. This tells you the return on the actual dollars you put in, which is what matters for your portfolio.

What's a good rental yield in 2026?

Rental math has gotten tougher. When mortgage rates were 3%, a 1% rent-to- price ratio was considered excellent. Today, with rates at 7%+, the same property is harder to make cash flow. Rough benchmarks for today's market:

• Gross yield: 8%+ is strong; 6–8% is moderate; under 6% often means negative cash flow after all costs.
• Cap rate: 6–8% is the sweet spot for single-family rentals in most US markets. Below 5% usually requires appreciation upside to make sense.
• Cash-on-cash return: 8%+ on leveraged deals. Many markets are producing 0–5% or negative cash-on-cash at current rates.

The "1% rule" and why it's broken

The old investor heuristic said that monthly rent should equal at least 1% of purchase price. A $250K house needs to rent for $2,500/month. In 2015–2020 markets, this was achievable in many secondary cities. By 2025, in most metros, you're lucky to hit 0.6–0.7%. Experienced investors now use a 0.7–0.8% rule, and even that's aspirational in appreciation-heavy markets like Denver, Phoenix, or Austin.

The 1% rule wasn't magic — it was a fast way to estimate whether a property would cash flow at 5% mortgage rates with 20% down. At 7% rates, you need a 1.2% rule to produce the same cash flow. Since rents don't scale that fast, many properties that penciled at 2020 prices and rates no longer do — which is why seasoned investors have largely paused buying.

The numbers most first-time landlords miss

• Vacancy. Even in tight markets, budget 5–10% vacancy. One month of turnover per 18 months of tenancy is not uncommon.
• Maintenance. Rule of thumb: 1% of home value per year, or 8–10% of gross rent. New construction trends lower; old homes trend much higher.
• Capital expenditures (CapEx). Separate from routine maintenance — roof, HVAC, water heater. Budget another 5% of rent or $3,000–$5,000 per year for a reserve fund.
• Property management. 8–10% of collected rent if you hire a manager. DIY saves money but costs time and requires you to be local.
• Insurance. Landlord policies cost 15–25% more than owner-occupied homeowner insurance.
• Higher property taxes. Many states eliminate the homestead exemption on non-owner-occupied properties, pushing your tax rate up.
• Income tax.Net rental income is taxable. Depreciation deduction helps substantially but doesn't make the taxes go away.

Why the calculator uses percentages for vacancy, maintenance, and management

These three costs scale with rent. A $1,500/month rental will have different maintenance and management costs than a $4,000/month rental, even if the homes are similar. Using percentages keeps the calculator honest across different property price points. A common "50% rule" in the investor community bundles all operating costs (excluding debt service) into 50% of gross rent — which matches fairly well with the defaults this calculator uses (8% vacancy + 8% maintenance + 8% management + ~25% for taxes and insurance on a typical property).

Appreciation, the silent partner

Cash flow isn't the only return. If the property appreciates 3% a year, you're also building equity from price growth on top of the rental income. Historical average appreciation is around 3–4% a year nationally, but with huge regional variation — and recent years (2020–2022) produced abnormal gains that are already normalizing.

Experienced investors think about total return: cash flow + principal paydown + appreciation + tax benefits. Even negative-cash-flow properties can be positive total-return investments if appreciation is strong and you have the runway to cover the monthly gap. The risk: appreciation isn't guaranteed, while your negative cash flow is.

The "buying at retail" problem

Most rental property listed on the MLS is priced at retail — what an owner-occupant would pay. Making the math work from a retail purchase is hard. Experienced investors buy off-market, at auction, or from distressed sellers to get the 10–20% discount that turns a breakeven deal into a cash-flowing one. If you're buying from the MLS at today's asking price, expect mediocre cash-on-cash returns unless you're in a truly landlord-friendly market.

Run the numbers at conservative, middle, and optimistic assumptions

Don't just plug in the seller's pro-forma. Run three scenarios:

• Conservative: 10% vacancy, 10% maintenance, 10% management, rent 5% below what the listing says.
• Middle: the calculator's defaults.
• Optimistic: 5% vacancy, 5% maintenance, self-manage, rent at market.

If the conservative scenario is still positive cash flow, you likely have a real deal. If the middle is negative and only the optimistic works, walk away — you're relying on everything going perfectly to break even.

Related tools

Compare the pure-financial return against our investment property calculator for cash-on-cash and cap rate over multiple years, or check our flip profit calculator for short-term flip strategies instead.