What is the difference between cap rate and ROI?

Cap rate is NOI ÷ property value (5.3% here). ROI in this calculator is cumulative net cash return ÷ all cash invested, including the down payment and recurring costs. Leverage raises ROI when NOI exceeds debt service.

How does vacancy affect rental property ROI?

Each 1% of vacancy on $24,000 rent costs $240 per year. At 6% vacancy ($1,440), year-one NOI drops to $14,560 and cash-on-cash falls by about 2.4 percentage points on a $60,000 down payment.

Should I include mortgage payments in this calculator?

Yes — add annual principal and interest to ongoing costs if you want levered cash-on-cash ROI. The defaults show unlevered operating cash relative to equity invested, before debt service.

ROI scenario

Rental Property ROI Calculator — Cash-on-Cash

Model a $60,000 down payment on a $300,000 rental with $2,000/month rent and $8,000 expenses. See cap rate, NOI, and 5-year ROI.

Rental ROI starts with cash you put in, not the full property price. The defaults mirror a $300,000 property with a $60,000 down payment (20%), $24,000 annual rent ($2,000 per month), $8,000 in operating expenses, and 3% rent growth. Year-one cash-on-cash return on the down payment is about 26.7% before mortgage service — strong on paper, but leverage, vacancy, and maintenance can erode it quickly. Over five years the calculator shows about 27.4% total ROI (5.0% annualized) on all cash invested, including ongoing expenses.

Initial Investment

Total upfront cost of the investment

Annual Revenue / Return

Expected annual revenue or gain

Annual Ongoing Costs

Recurring annual expenses

Time Period

years

Annual Revenue Growth

Expected annual revenue increase

Total ROI

27.4%

Over 5 years

Net Profit

$27,419

Revenue minus all costs

Annualized ROI

5.0%

Average return per year

Total Cost

$100,000

Initial + ongoing costs

Total Revenue

$127,419

Cumulative returns

Payback Period

3.8 years

Time to recover investment

Year-by-Year Breakdown

Year	Revenue	Cost	Cumulative Profit	Cumulative ROI
1	$24,000	$68,000	-$44,000	-64.7%
2	$24,720	$8,000	-$27,280	-35.9%
3	$25,462	$8,000	-$9,818	-11.7%
4	$26,225	$8,000	$8,407	9.1%
5	$27,012	$8,000	$27,419	27.4%

Key Considerations

Year-one net operating income is $16,000 ($24,000 rent − $8,000 expenses). Dividing by your $60,000 down payment gives 26.7% cash-on-cash before debt service; dividing by $300,000 value gives a 5.3% cap rate on NOI (8.0% on gross rent).
At 3% rent growth, year-five rent hits about $27,813, adding $3,813 in annual revenue without new equity — cumulative five-year revenue totals about $127,419 in the calculator.
Budget at least 1% of property value ($3,000 here) for maintenance plus a vacancy reserve — 5–8% of gross rent ($1,200–$1,920) is a common planning range, though local markets differ.
Financing changes the story: this ROI calculator treats revenue as net cash to you after operating costs but does not subtract mortgage principal and interest — add P&I to ongoing costs for levered deals.
Depreciation can improve after-tax cash flow even when pre-tax ROI looks flat; model taxes separately with your CPA.

Quick Numbers

Down payment	$60,000 (20% of $300,000)
Year-one NOI	$16,000
Gross cap rate	8.0% ($24,000 ÷ $300,000)
NOI cap rate	5.3%
5-year total ROI	27.4% (5.0% annualized)
5-year net profit	$27,419

How This Compares

Five-year total ROI near 27% trails a hypothetical equity portfolio compounding at the long-run S&P 500 rate of about 10% per year (S&P 500 total return, 1928–2025, Damodaran), but rental income is often less correlated with public markets. You trade liquidity and simplicity for leverage and local market risk.

Frequently Asked Questions

What is the difference between cap rate and ROI?: Cap rate is NOI ÷ property value (5.3% here). ROI in this calculator is cumulative net cash return ÷ all cash invested, including the down payment and recurring costs. Leverage raises ROI when NOI exceeds debt service.
How does vacancy affect rental property ROI?: Each 1% of vacancy on $24,000 rent costs $240 per year. At 6% vacancy ($1,440), year-one NOI drops to $14,560 and cash-on-cash falls by about 2.4 percentage points on a $60,000 down payment.
Should I include mortgage payments in this calculator?: Yes — add annual principal and interest to ongoing costs if you want levered cash-on-cash ROI. The defaults show unlevered operating cash relative to equity invested, before debt service.

Source Damodaran S&P 500 historical returns (Jan. 2026). Checked October 2026. Vacancy and maintenance ranges are planning assumptions, not national census figures.