Purpose and steps
NOI = collected rent − operating expenses, before debt service. Cash-on-cash = annual cash flow / initial cash invested. Holding ROI = (cash flows + ending equity − initial cash) / initial cash. The calculation runs locally and keeps cash-flow timing consistent with the stated assumptions.
- Confirm currency and monthly versus annual amounts. U.S. tax and loan models should be used within their stated scope.
- Prepare Home price, Down payment, Annual interest rate, Loan term, Annual property tax rate, Annual homeowners insurance, Monthly HOA dues, Monthly rental income, Vacancy allowance, Maintenance / gross rent, Management / collected rent, Purchase closing costs, Annual price and rent growth, Holding period. Defaults demonstrate the model rather than your personal circumstances.
- Check the headline result and its components. A key interpretation for this tool is: Cap rate evaluates unlevered operating income; cash-on-cash reflects debt service and initial cash.
- Compare the baseline with a changed scenario: A high holding ROI may depend on appreciation rather than positive current cash flow.
Input reference and units
These values reproduce the model’s demonstration. Replace them with your own records or measurements; they are not recommended targets.
On a small screen, swipe the table horizontally to see all columns.
| Parameter | Demonstration value | How to enter it |
|---|---|---|
| Home price | 400000 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Down payment | 20 % | Check the unit carefully: some tools use a percentage and others a cash amount. |
| Annual interest rate | 6.5 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Loan term | 30 years | Use years here. The model converts to months when the payment schedule requires it. |
| Annual property tax rate | 1.2 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Annual homeowners insurance | 1800 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Monthly HOA dues | 0 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Monthly rental income | 2500 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Vacancy allowance | 5 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Maintenance / gross rent | 10 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Management / collected rent | 8 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Purchase closing costs | 10000 USD | Use dollars and the monthly or annual period stated in the field label; do not enter thousands of dollars. |
| Annual price and rent growth | 3 % | Enter a percentage such as 6.5, not 0.065. The equation converts it to a decimal. |
| Holding period | 10 years | Use years here. The model converts to months when the payment schedule requires it. |
Model-specific method
How this calculator produces its result
NOI = collected rent − operating expenses, before debt service. Cash-on-cash = annual cash flow / initial cash invested. Holding ROI = (cash flows + ending equity − initial cash) / initial cash.
A cash-flow waterfall and scenario sensitivity
Income and costs form successive layers. Subtracting financing before computing NOI changes the definition and distorts cap-rate comparisons. Principal repayment uses cash but can also build equity, so a tax profit, operating profit and cash-flow result may legitimately differ.
Sensitivity analysis changes one assumption while keeping the others fixed. If yearly potential rent is G, a one-percentage-point vacancy increase directly reduces collected rent by G×0.01, before variable expense offsets. Combined stress scenarios are also important: vacancy, maintenance and borrowing costs can worsen together.
Effective income = potential income × (1 − vacancy) NOI = effective income − operating expenses Cash flow = NOI − debt service DSCR = NOI / debt service
- Potential income: before vacancy or collection loss
- NOI: net operating income before financing
- Debt service: contractual principal and interest payments
- Cash flow: money remaining after the modeled payments
Worked example
A $400,000 property with $30,000 gross annual rent and 5% vacancy collects $28,500 before expenses. A 20% down payment plus $10,000 closing costs puts initial cash invested at $90,000.
Reproduce the default scenario
This is a separate example, calculated using the exact engine on the tool page and the defaults in the input reference above. Health examples use metric units. Displayed rounding may differ from intermediate precision.
- First-year monthly cash flow
- -637.62 USD
- Net operating income / year
- 16,620 USD
- Annual cash flow
- -7,651.41 USD
- Cap rate
- 4.15%
- Cash-on-cash return
- -8.5%
- Debt-service coverage ratio
- 0.68
- Initial cash invested
- 90,000 USD
- Ending equity before selling costs
- 266,282.95 USD
- Holding-period profit
- 124,098.5 USD
- Holding-period ROI
- 137.89%
Reading results without overstating them
- Cap rate evaluates unlevered operating income; cash-on-cash reflects debt service and initial cash.
- A high holding ROI may depend on appreciation rather than positive current cash flow.
Assumptions and exclusions
- Rent and all operating expenses grow at the entered appreciation rate. Sale costs, capital-gains tax, depreciation benefits, major repairs, refinance and rent-control rules are excluded.
Sources and content notes
Toolify describes the implemented algorithm and its assumptions. Sources below support the topic or applicable rules; they do not endorse this calculator. Examples are illustrative, and published rules take precedence over simplified estimates.
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