FINANCIAL · RENTAL YIELD
Rental Yield Calculator
Calculate gross yield, net yield, cap rate, cash-on-cash return, and the 1% rule for any rental property. Computes your mortgage payment automatically from loan amount, rate, and term.
Gross and net yield use total acquisition cost as denominator. Cap rate uses purchase price only (appraisal convention). Cash-on-cash uses equity invested. UK gross yield typically uses purchase price alone — this calculator uses total acquisition cost for a conservative US investor view.
About This Calculator
Analyze any rental property investment in seconds. Enter the purchase price, acquisition costs, rent, operating expenses, and financing — and get gross yield, net yield, cap rate, cash-on-cash return, and a 1% rule check, all computed with the same formulas used by institutional real estate investors.
How It Works
The calculator derives five investor metrics from your inputs. Gross and net rental yield use your total acquisition cost (price + closing + rehab) as the denominator — the most conservative and defensible basis for a purchase decision. Cap rate uses purchase price only (the appraisal convention, so your number is directly comparable to market cap rates). Cash-on-cash uses your equity (total cash invested) and subtracts annual debt service from NOI to capture your levered return. The 1% rule is a quick screen: monthly rent ≥ 1% of purchase price. The monthly mortgage payment is automatically computed from your loan amount, interest rate, and term using the standard amortization formula.
The Formula
Gross Yield = GAR / TAC Net Yield = NOI / TAC Cap Rate = NOI / Purchase Price Cash-on-Cash = (NOI − Annual Debt Service) / Equity 1% Rule: Monthly Rent ≥ 1% × Purchase Price
- GAR
- Gross Annual Rent — monthly rent × 12
- TAC
- Total Acquisition Cost — purchase price + closing costs + rehab
- NOI
- Net Operating Income — EGI minus all operating expenses (debt excluded)
- EGI
- Effective Gross Income — gross rent after vacancy loss
- Equity
- Total cash invested — TAC minus loan amount (your down payment + costs)
Frequently Asked Questions
- Why does the calculator exclude the mortgage from NOI?
- NOI (Net Operating Income) is an unlevered metric — it measures the property's income-generating ability regardless of how you financed it. Two investors owning the same property, one all-cash and one with a mortgage, have identical NOIs. Debt service is subtracted separately to compute cash-on-cash return. Mixing the two is the single most common error in DIY rental analysis.
- Why do gross and net yield use total acquisition cost instead of purchase price?
- Using total acquisition cost (price + closing costs + rehab) gives you the most conservative and accurate picture of what the property actually cost you. Some sources use purchase price alone (particularly UK convention), which produces a higher but less honest yield number. This calculator uses TAC as the denominator for yield and cap rate uses purchase price only — matching the standard appraisal convention so you can compare to market cap rates.
- What is a good cap rate?
- For US residential rentals, cap rates typically range from 4–10% depending on market, property class, and condition. Single-family rentals in high-appreciation markets (e.g. coastal cities) often have low cap rates (4–6%) while those in high-cash-flow markets (e.g. Midwest) can exceed 8%. Compare to local market cap rates — a cap rate significantly below market suggests you are overpaying.
- Why is my cash-on-cash return negative?
- Negative cash-on-cash means your debt service exceeds your NOI — you are paying out of pocket every year. This is common at high leverage and high interest rates. It does not necessarily mean the investment is bad — appreciation may compensate — but you should have reserves to cover the shortfall. The calculator always shows the actual number, even when negative.
- What is the 1% rule?
- The 1% rule is a quick screening heuristic — monthly rent should be at least 1% of the purchase price. For a $250,000 property, that's $2,500/month. A property that passes the 1% rule is more likely to generate positive cash flow, but it is only a first filter, not a substitute for full analysis. Many high-quality investments fail the 1% rule in appreciated markets.
- Does the calculator handle all-cash purchases?
- Yes. Set Loan Amount to 0 for an all-cash deal. The calculator sets debt service to zero, so annual pre-tax cash flow equals NOI. When closing costs and rehab are also zero, cash-on-cash equals the cap rate — this is mathematically expected and correct.