Free US Investor Tool

Rental Property ROI Calculator

Cap rate, cash-on-cash ROI, MACRS depreciation, Schedule E tax estimate, and 1% rule check — built for US real estate investors.

Cap Rate Cash-on-Cash ROI MACRS Depreciation Schedule E Tax 1% Rule Check Monthly Cashflow
Advertisement

Property Details

Purchase & Financing
Purchase Price
$
Down Payment
%
Closing Costs
$
Mortgage Rateinvestment property avg ~7–8%
%
Loan Term
yr
Land Value% of price — non-depreciable
%
Rental Income
Monthly Gross Rent
$
Vacancy RateUS avg ~8%
%
Annual Operating Expenses
Property Management% of collected rent
%
Annual Maintenance% of property value
%
Annual Property Tax Rate
%
Annual Insurance
$
HOA / Other Annual
$
Tax Rates
Federal Income Tax Rate22% / 24% / 32% common
%
State Income Tax Rate0% TX/FL/NV — 13.3% CA
%
↓ Methodology ↓
How this calculator works — formulas & sources
Gross Rental Yield
Gross Yield = Annual Rent ÷ Purchase Price × 100%
Quick screening metric before expenses. Does not account for financing, vacancy, or operating costs. Compare net yield for actual investment decisions.
Net Operating Income (NOI)
NOI = Gross Rent × (1 − Vacancy%) − Annual Operating Expenses
Operating Expenses = Management + Maintenance + Tax + Insurance + HOA
Excludes mortgage payments and income taxes. The core metric for property valuation independent of financing structure.
Cap Rate
Cap Rate = NOI ÷ Purchase Price × 100%
All-cash return — allows comparison of properties regardless of how they're financed. US benchmark: 5–7% is moderate, 8%+ is strong, below 4% is typically appreciation-driven.
Cash-on-Cash ROI
CoC ROI = Annual Pre-Tax Cash Flow ÷ Total Cash Invested × 100%
Cash Flow = NOI − Annual Mortgage Payments
Cash Invested = Down Payment + Closing Costs
Measures return on your actual out-of-pocket investment. Unlike cap rate, it reflects financing. Target: 8%+ CoC is considered strong for most US markets.
MACRS Depreciation
Annual Depreciation = Depreciable Basis ÷ 27.5
Depreciable Basis = Purchase Price × (1 − Land%)
Residential rental property depreciated over 27.5 years straight-line per IRS MACRS rules. Land is non-depreciable. Depreciation is a non-cash deduction reducing taxable income. Source: IRS Publication 946.
Schedule E Tax Estimate
Taxable Income = NOI − Mortgage Interest − Depreciation
Tax Owed = Taxable Income × (Federal Rate + State Rate)
After-Tax Cash Flow = Pre-Tax Cash Flow − Tax Owed
Simplified Schedule E estimate. Actual tax treatment depends on passive activity rules, AGI limits ($25k deduction phases out $100k–$150k), real estate professional status, and state-specific rules. Always consult a CPA.
1% Rule
Monthly Rent ÷ Purchase Price ≥ 1%
Quick screening threshold. If monthly rent is at least 1% of purchase price, the property may cash flow after expenses. A rough filter only — not a substitute for full NOI analysis. High-appreciation markets (NYC, LA, SF) rarely meet this threshold.
Sources: IRS Publication 946 (MACRS depreciation) · IRS Schedule E instructions · IRC §469 (passive activity rules) · IRC §1250 (depreciation recapture at 25%)
Last reviewed: April 2026

Investment Analysis

Cash-on-Cash ROI
—
—
⬤ Calculating…
Cap Rate
—
all-cash return
Gross Rent Mult.
—
price ÷ ann. rent
Monthly Cashflow
—
after tax
NOI (annual)
—
before financing
—
Annual Income & Expenses
Schedule E Tax Summary
Annual Mortgage Interest—
MACRS Depreciation (27.5yr)—
Schedule E Taxable Income—
Est. Tax Liability—
Advertisement

Download the Full Excel Version

Includes Schedule E summary worksheet and complete US Rental Investment Guide.

Download — $14.99 →
Advertisement
How it works

The metrics that serious investors use

Monthly cashflow is just the start. Here's what cap rate, depreciation, and Schedule E actually mean for your returns.

01 — CAP RATE
The all-cash return

Cap rate is NOI divided by purchase price — the return you'd earn if you paid all cash. It removes financing from the equation so you can compare deals in different markets regardless of how you're funding them. Strong: 8%+. Acceptable: 6–8%. Below 6% means you're betting on appreciation, not cashflow.

02 — CASH-ON-CASH ROI
Return on your actual cash

Cash-on-cash ROI measures annual cashflow after all costs and taxes divided by total cash invested (down payment plus closing costs). This is what your money actually earns. A 10%+ CoC ROI means every $67,500 you invest returns $6,750+ per year in cash. Target 10%+ for strong deals, 6–10% for acceptable.

03 — MACRS DEPRECIATION
The US investor's tax shield

US tax law lets you deduct the building value (not land) over 27.5 years as a non-cash expense. On a $200,000 property with 25% land, that's $5,455/year in tax deductions without spending a dollar. Combined with full mortgage interest deductibility (no Section 24 in the US), depreciation often makes rental income tax-free or even creates a paper loss.

04 — SCHEDULE E
How rental income is taxed

Rental income flows to Schedule E on your US tax return. Unlike the UK's Section 24, mortgage interest is fully deductible. You subtract all expenses, interest, and depreciation from gross rent to get taxable income. Negative Schedule E income (paper loss) can offset other passive income — and in some cases, ordinary income if you qualify as a Real Estate Professional.

05 — THE 1% RULE
The quick cashflow screen

The 1% rule says monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for $2,000+/month. It's a quick filter — not a guarantee. Many strong deals in appreciating markets fail the 1% rule, while many 1% deals in stagnant markets still lose money after expenses. Always run the full analysis.

06 — PASSIVE ACTIVITY RULES
The tax limit most investors hit

Rental losses are classified as passive — they can only offset passive income unless you qualify for an exception. If your AGI is under $100,000 and you actively manage the property, you can deduct up to $25,000 of rental losses against ordinary income. This phases out completely above $150,000 AGI. Real Estate Professional status removes the limitation entirely but requires strict documentation.

FAQ

Common questions

What is a good cap rate for a rental property in the US?
It depends on the market. In high-appreciation coastal markets (NYC, LA, San Francisco), cap rates of 3–5% are common — investors accept lower cashflow for appreciation potential. In Midwest and Southern markets (Kansas City, Memphis, Birmingham), 7–10% cap rates are achievable. A cap rate above 8% in a stable market is generally considered strong. Below 5% in a flat market means you're relying almost entirely on appreciation, which carries more risk.
How does MACRS depreciation work for rental properties?
Under MACRS (Modified Accelerated Cost Recovery System), residential rental properties are depreciated over 27.5 years using the straight-line method. Only the building value depreciates — land does not. If you buy a $200,000 property where 25% is land value ($50,000), the depreciable basis is $150,000. Annual depreciation = $150,000 ÷ 27.5 = $5,455/year in non-cash tax deductions. When you sell, depreciation is recaptured at 25% (Unrecaptured Section 1250 Gain). A 1031 Exchange defers recapture.
Can I deduct mortgage interest on a rental property?
Yes — fully. Unlike the UK's Section 24 restriction, US rental property owners can deduct 100% of mortgage interest as an operating expense on Schedule E. This is one of the most significant differences between UK and US rental property taxation. Combined with depreciation, mortgage interest deductions often make rental income tax-neutral or create a paper loss even when you're cash-flow positive.
What is the passive activity loss rule and how does it affect me?
The IRS classifies rental income as passive activity. Passive losses can only offset passive income (from other rental properties or passive business investments). However, there are two exceptions: if your AGI is under $100,000 and you actively participate in managing the property, you can deduct up to $25,000 of rental losses against ordinary income. This allowance phases out between $100k–$150k AGI. If you qualify as a Real Estate Professional (750+ hours/year in real estate activities AND it's your primary occupation), rental losses become non-passive and fully deductible.
What down payment do I need for an investment property?
Most lenders require 15–25% down for investment properties. The minimum is typically 15% for a single-unit property, but many lenders require 20–25% for better rates. FHA and VA loans are not available for non-owner-occupied investment properties — you must use conventional financing. Investment property rates are typically 0.5–1.5% higher than primary residence rates. DSCR (Debt-Service Coverage Ratio) loans underwrite based on the property's rental income rather than your personal income — useful for investors with complex tax situations.
Is rental income taxed as ordinary income?
Net rental income (after all deductions including depreciation and mortgage interest) is taxed at your ordinary income tax rate — not capital gains rates. However, depreciation and interest deductions often reduce or eliminate taxable rental income even when you're cash-flow positive. When you sell the property, the gain is taxed at capital gains rates (0%, 15%, or 20% depending on income), except for the portion attributable to depreciation, which is recaptured at a flat 25% rate.