Real Estate Calculator Guide
Most people run their first rental property numbers backward. They fall in love with a house, then try to convince themselves the math works. The better approach is to treat every property the same way a lender or a seasoned landlord would — as a stream of cash in and cash out — and let one number tell you whether it clears the bar before you get emotionally attached.
Cash-on-Cash Return: Your First-Pass Filter
When you're screening properties, cash-on-cash return is the fastest way to compare deals that look nothing alike on the surface. It answers one question: for every dollar you actually pulled out of your bank account, how many cents come back to you each year? That's different from your total return, which would also count the mortgage principal you're paying down and any appreciation — cash-on-cash strips all of that away and looks only at the check you could deposit today.
A widely cited target among buy-and-hold investors is a cash-on-cash return somewhere in the 8-12% range, though plenty of deals get bought at lower numbers in expensive coastal markets where investors are betting more on appreciation than on monthly income. There's no universal cutoff — a 5% cash-on-cash return might be perfectly reasonable in a market where prices are also climbing 6% a year, while the same 5% would be a poor trade in a flat or declining market. Treat it as a screening threshold, not a guarantee of a good deal.
A Worked Example
Say you're looking at a $300,000 duplex with 20% down ($60,000), plus $6,000 in closing costs and $5,000 to freshen up a unit before renting it — $71,000 of cash out of pocket. At a 6.5% rate on a 30-year loan, the $240,000 balance costs roughly $1,517 a month in principal and interest. Rent comes in at $2,200, but after a 5% vacancy allowance, an 8% management fee, property tax, insurance, and maintenance, your real monthly cash flow might land closer to $150-250 — not the $683 you'd get from naively subtracting the mortgage payment from gross rent. Annualized, that modest cash flow divided by your $71,000 invested is what produces your cash-on-cash number, and it's usually a smaller figure than first-time buyers expect. Run your own numbers through the calculator above to see how sensitive that outcome is to vacancy and management assumptions.
Where This Framing Runs Out
Cash-on-cash return is deliberately simple, and that simplicity is also its limit. It ignores financing entirely, so two identical properties bought with different down payments will show wildly different cash-on-cash returns even though the underlying asset performs the same. It also says nothing about principal paydown, tax depreciation, or what happens if you refinance in five years. If you're past the initial screening stage and want to compare a property's performance independent of how it's financed — useful when you're negotiating price or comparing an all-cash purchase to a leveraged one — that's exactly what cap rate is built for, and it's worth reading the rental property calculator for a deeper look at that metric and at long-run appreciation and tax effects.
It's also worth remembering this is a screening tool, not a substitute for due diligence or professional advice — a real estate attorney, a CPA familiar with rental property depreciation rules, and a local property manager who knows true vacancy rates in your specific market will all sharpen these numbers considerably before you sign anything.
Financing Shapes Everything Downstream
Because the mortgage payment is usually the single largest line item in the calculation, small rate differences move your cash flow more than almost any other variable. Before you commit to numbers on a specific property, compare a few loan scenarios with the mortgage calculator or the general-purpose loan calculator, and if you already own the property and rates have moved since you bought, it's worth checking whether refinancing would improve your cash flow using the refinance calculator guide.