What is a good rental yield?

What constitutes a 'good' rental yield depends heavily on location, property type, and your investment goals. As a general guide: a gross yield above 7% is considered strong for most US residential markets; a net yield (cap rate) above 5–6% is typically a threshold for positive leverage at current mortgage rates of around 6.5–7.5%; a cap rate below 4% (common in high-demand cities like San Francisco, NYC, or coastal markets) means you are primarily investing for appreciation, as the cash flow economics are negative at any reasonable leverage. Class A properties in prime locations tend to have lower cap rates (3–5%) but stronger appreciation. Class B/C properties in secondary markets often have higher cap rates (6–10%) but higher management burden and lower appreciation potential. The 1% rule (monthly rent ≥ 1% of purchase price) is a quick screening tool — a $350,000 property should rent for at least $3,500/month to pass the 1% rule. In most US markets today, properties that pass the 1% rule are rare.

What is the cap rate and why does it matter?

The capitalisation rate (cap rate) is the net operating income (NOI) divided by the property value — it is the return you would earn if you bought the property all-cash with no mortgage. Cap rate = NOI / Value. It is the universal metric for comparing investment properties regardless of financing structure. A property worth $350,000 with $16,500 NOI has a cap rate of 4.71%. If mortgage rates are 7% and your cap rate is 4.71%, your leverage is 'negative' — meaning the mortgage costs more than the property earns, generating negative cash flow. If your cap rate exceeds your mortgage rate, leverage is 'positive' and borrowing amplifies your cash-on-cash return. Cap rates vary significantly by market, property type, and class. Always compare cap rates within the same asset class — comparing a suburban single-family cap rate to a multifamily cap rate is not meaningful.

What is cash-on-cash return and how is it different from cap rate?

Cap rate measures the property's income relative to its value, independent of financing. Cash-on-cash (CoC) return measures the actual cash income relative to the cash you invested (your down payment). They will be equal only if you pay all-cash. With a mortgage, CoC can be dramatically different from cap rate — in either direction. If your cap rate (5%) exceeds your mortgage rate (7%), CoC is lower than cap rate — negative leverage hurts your actual return. If cap rate (7%) exceeds mortgage rate (6%), borrowing amplifies your return — a $70,000 down payment on a property generating $5,000/year in cash flow gives a 7.1% CoC return even though the all-cash return might only be 5%. In today's interest rate environment (7%+ mortgages), most residential properties have negative leverage — cap rates are lower than mortgage rates, meaning borrowing reduces rather than amplifies returns.

What expenses should I budget for as a landlord?

A common framework is the 50% rule: budget approximately 50% of gross rent for all non-mortgage expenses. The breakdown for a typical residential property: Property taxes: 0.5–2.5% of value annually (varies enormously by state — Texas and Illinois are high, Hawaii and Alabama are low). Insurance: 0.25–0.5% of value annually. Maintenance and repairs: budget 1–2% of value annually as a long-term reserve (new roof, HVAC, appliances, plumbing — these costs are lumpy but average out over time). Vacancy: 5–10% of potential rent is realistic for most markets. Property management: 8–12% of collected rent if using a manager. HOA fees: if applicable. CapEx reserves: separate from maintenance — major capital expenditures like roof replacement every 20 years, HVAC every 15 years. Many landlords underestimate maintenance and CapEx, which are the biggest source of surprise losses in real estate investing.

What is negative cash flow and is it ever acceptable?

Negative cash flow means the property costs more to hold each month than it generates in rent after all expenses and mortgage payments. In the example of a $350,000 property with $2,200/month rent and a 7% mortgage, the cash flow is approximately −$491/month — you would need to contribute $491 from your own pocket each month to hold the property. This is common in high-demand, low-yield markets (San Francisco, New York, Los Angeles, coastal Australia). Negative cash flow investment is sometimes called 'negative gearing' and is accepted when the investor believes appreciation will more than compensate for the carrying cost. Over a 5-year period, 4% annual appreciation on a $350,000 property adds $76,000 in equity — more than offsetting the $29,460 in negative cash flow contributions. However, negative cash flow investment only makes sense if you have the income to cover the shortfall, believe strongly in local appreciation, and can hold through downturns without being forced to sell.

Rental Yield Calculator — Gross Yield, Net Yield, Cap Rate & Cash Flow

Rental yield is the annual return a rental property generates as a percentage of its value — but the number that matters to investors is not the gross yield (rent ÷ value) but the net yield after all expenses, vacancy, and management fees are accounted for. This Rental Yield Calculator computes both...

RENTAL YIELD

🏠 PROPERTY

Property Value / Purchase Price

Monthly Rent

Annual gross rent: $26,400

💰 ANNUAL EXPENSES

Property Insurance

Maintenance & Repairs

Property Taxes

Other Expenses

Vacancy Rate

Management Fee

🏦 MORTGAGE

Down Payment (%)

Rate (%)

Term

Down payment: $70,000 · Loan: $280,000 · Monthly P&I: $1,863

📈 GROWTH (FOR 5-YEAR PROJECTION)

Rent Growth / yr

Appreciation / yr

GROSS YIELD

7.54%

NET YIELD / CAP RATE

4.74%

NOI

$16,574/yr

CASH FLOW

−$482/mo

CASH-ON-CASH

-8.30%

RENTAL ANALYSIS

KEY METRICS

GROSS YIELD

7.54%

NET YIELD / CAP RATE

4.74%

CASH-ON-CASH

-8.30%

MONTHLY CASH FLOW

−$482/mo

ANNUAL INCOME → EXPENSES → NOI

NOI

EXPENSES

NOI: $16,574Expenses: $9,826Gross: $26,400

EXPENSE BREAKDOWN

Property insurance

$1,200

Maintenance / repairs

$1,800

Property taxes

$3,500

Vacancy allowance

$1,320

Property management

$2,006

NOI

$16,574

EXPENSE RATIO

37.2%

GROSS RENT MULT.

13.3×

MONTHLY CASH FLOW

−$482

Live chart · updates as you type

Created with❤️byeaglecalculator.com

ANNUAL P&L STATEMENT

RENTAL PROPERTY — $350,000 VALUE · $2,200/MO RENT

Annual Gross Rent	$26,400
Less: Vacancy Loss	($1,320)
Effective Gross Income (EGI)	$25,080
Property insurance	($1,200)
Maintenance / repairs	($1,800)
Property taxes	($3,500)
Vacancy allowance	($1,320)
Property management	($2,006)
Net Operating Income (NOI)	$16,574
Less: Annual Debt Service	($22,356)
Annual Cash Flow	($5,782)

5-YEAR PROJECTION

3% RENT GROWTH · 3% APPRECIATION PER YEAR

YEAR	ANNUAL RENT	EXPENSES	NOI	DEBT SERVICE	CASH FLOW	PROPERTY VALUE	EQUITY
Year 1	$27,192	$12,188	$15,004	$22,356	−$7,352	$361K	$83K
Year 2	$28,008	$12,553	$15,455	$22,356	−$6,901	$371K	$97K
Year 3	$28,848	$12,929	$15,919	$22,356	−$6,437	$382K	$112K
Year 4	$29,713	$13,318	$16,395	$22,356	−$5,961	$394K	$127K
Year 5	$30,604	$13,717	$16,887	$22,356	−$5,469	$406K	$142K

Projection uses simplified loan amortisation. Expenses grow at 3%/year. Debt service is fixed for the term. Equity = property value − remaining loan balance.

HOW TO USE

1
Enter the property value or purchase price — the total amount paid including closing costs if you want a fully-loaded return calculation.
2
Enter the monthly rent you charge or expect to charge. The calculator shows the annual gross rent and updates all yields live as you type.
3
Enter your annual expenses: property insurance (typically 0.25–0.5% of value), maintenance and repairs (budget 1–2% of value annually as a reserve), and property taxes (check your local rate — typically 0.5–2.5% of value).
4
Select your vacancy rate — the percentage of the year the property sits empty. A 5% vacancy rate = approximately 18 days/year unoccupied. Use 8–10% in higher-turnover markets.
5
Select the property management fee if you use a property manager. Most residential property managers charge 8–12% of collected rent. Set to 0% if self-managing.
6
Toggle the mortgage section on (the default) to model a leveraged investment, or off to see all-cash returns. Enter your down payment percentage, mortgage rate, and loan term.
7
Enter rent growth and appreciation rates for the 5-year projection. Historical US averages: ~3% annual rent growth, ~3–4% annual appreciation. Local markets vary significantly.
8
Review the Annual P&L Statement table for a professional-format breakdown of income, all expense categories, NOI, debt service, and net cash flow.

WORKED EXAMPLE

Example: Property value $350,000, monthly rent $2,200. Annual gross rent = $2,200 × 12 = $26,400. Gross yield = $26,400 / $350,000 = 7.54%. Expenses: insurance $1,200 + maintenance $1,800 + property tax $3,500 + vacancy 5% ($1,320) + management 8% ($2,112) = $9,932. NOI = $26,400 − $9,932 = $16,468. Net yield = cap rate = $16,468 / $350,000 = 4.71%. Mortgage: 20% down ($70,000) at 7.0% for 30 years → monthly P&I = $1,863 → annual debt service = $22,356. Cash flow = $16,468 − $22,356 = −$5,888/yr (−$491/mo). Cash-on-cash return = −$5,888 / $70,000 = −8.41%. GRM = $350,000 / $26,400 = 13.3×.

REFERENCE FORMULAS

FORMULA REFERENCE TABLE

NAME	FORMULA	DESCRIPTION
Gross Yield	Gross Yield = (Annual Rent ÷ Property Value) × 100	Rental income as % of property value — before expenses
Net Yield / Cap Rate	Net Yield = (NOI ÷ Property Value) × 100	NOI as % of property value — the standard metric for comparing investment properties
NOI	NOI = Gross Rent − Vacancy − Operating Expenses (excl. mortgage)	Net Operating Income — earnings before debt service
Cash-on-Cash Return	CoC = Annual Cash Flow ÷ Down Payment × 100	Cash yield on your actual equity invested — most relevant metric for leveraged investors
Cash Flow	Cash Flow = NOI − Annual Debt Service	Money left after paying all expenses AND mortgage — can be negative with high leverage
Monthly Mortgage P&I	PMT = P × [r(1+r)^n] / [(1+r)^n − 1]	P = loan amount, r = monthly rate, n = total months
GRM	GRM = Property Value ÷ Annual Gross Rent	Gross Rent Multiplier — years of gross rent to recover purchase price. Lower = better value
Expense Ratio	Expense Ratio = Total Expenses ÷ Gross Rent × 100	Percentage of gross rent consumed by expenses — typically 35–50% for residential

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Disclaimer: This calculator is for informational purposes only. Projections involve estimates and assumptions that may not reflect actual outcomes. Property investment carries significant risks including vacancy, depreciation, and changes in market conditions. This is not financial or investment advice — consult a licensed real estate professional.

Last updated: April 25, 2026 · Formula verified by EagleCalculator team · Eagle-eyed accuracy for every calculation.