Is Your Rental Property Actually Making Money?
Use our [Rental Property Investment Calculator](/calculators/finance/rental-property-investment-calculator) to see your true numbers.
The Real ROI Calculation
What most landlords calculate:
- Monthly rent: $2,000 minus Mortgage: $1,200 = $800 profit
What it actually looks like:
| Income | Amount/Year |
|---|---|
| Gross rent | $24,000 |
| Vacancy (6%) | -$1,440 |
| Effective Income | $22,560 |
| Expenses | Amount/Year |
|---|---|
| Mortgage P&I | $14,400 |
| Property tax | $3,600 |
| Insurance | $1,200 |
| Maintenance (1%) | $3,200 |
| Property management (8%) | $1,800 |
| CapEx reserve | $1,500 |
| Total | $25,700 |
Real annual cash flow: -$3,140 (negative!)
The 5 ROI Metrics You Need
1. Gross Rental Yield — Annual Rent / Property Value = 7.5% (sounds good)
2. Net Rental Yield — Net income / Property Value = 3.75% (more realistic)
3. Cash-on-Cash Return — Cash flow / Cash invested = negative in this case
4. Cap Rate — NOI / Property Value = 4.7% (reasonable for appreciation markets)
5. Total Return — Includes appreciation and loan paydown (looks better over 5-10 years)
Calculate all five with our [Rental Yield Calculator](/calculators/finance/rental-yield-calculator).
The 1% Rule in 2026
The old 1% rule (monthly rent = 1% of purchase price) is nearly impossible in major US cities in 2026. Typical yields in NYC/LA/SF are 0.3-0.6%. Still valid in Midwest markets like Cleveland, Memphis, and Indianapolis.
Related Real Estate Tools
- [Mortgage Calculator](/calculators/finance/mortgage-calculator) — Payment on investment property
- [Rental Income Tax Calculator](/calculators/finance/rental-income-tax-calculator) — Tax on rental income
- [ROI Calculator](/calculators/finance/roi-calculator) — Real estate vs stocks comparison