Rental Property Total Return Calculator
The deal & the hold
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- United States — state and local practice
- Scope and limitations
- Educational estimate only. U.S. real estate costs are local: property tax rates, transfer and recording taxes, title practice, who customarily pays which closing cost, and landlord-tenant rules all change by state and often by county or city. Agent commission is negotiable and, since the 2024 NAR settlement, buyer-agent compensation is negotiated separately rather than assumed. Only a lender's Loan Estimate, a title company's fee sheet or a signed contract binds a number.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the purchase price, the rent, your down payment and the mortgage rate.
- 02
Set how long you intend to hold it. That single number changes the answer more than any other.
- 03
Open Advanced options for closing and rehab, the operating expense share, and the growth assumptions.
- 04
Read the total profit and the annualized return on your cash.
- 05
Look at the ring: cash flow is usually the smallest of the four ways a rental pays you, and the chart shows the year the deal turns positive.
Formula
The loan is the price less the down payment, and the cash invested is the down payment plus closing and rehab. The mortgage is amortised month by month so the balance is tracked exactly. For each year of the hold: rent grows at the rent-growth rate, operating expenses are a share of that rent, debt service is twelve payments while the loan is alive, and cash flow is what remains. Depreciation is the building share of the price over 27.5 years, and the tax it saves is that times your marginal rate. At the end, the value has appreciated at the appreciation rate, selling costs come off it, and the remaining balance is repaid — leaving the equity at sale. Total profit is cumulative cash flow plus cumulative tax saved plus equity at sale, minus the cash invested. The annualized return is the compound rate that turns cash invested into cash invested plus profit over the hold, and it renders as a dash rather than a number when the deal wiped out the capital. The ring sums to gross gain, which is cash flow plus paydown plus appreciation after costs plus tax saved; the headline subtracts the up-front closing and rehab, and that subtraction is the difference between them.
Example
A $420,000 property renting for $2,600, 25% down at 6.5%, held ten years, with $15,000 of closing and rehab and the default growth assumptions. Cash invested: $105,000 + $15,000 = $120,000. Loan: $315,000 at 6.5% over 30 years. Over ten years: cumulative cash flow −$24,318, principal paid down $47,955, appreciation after selling costs $99,289, depreciation tax saved $29,324. Total profit: $137,250, an annualized 7.9% on the cash invested. Read that first line again. The property loses money every month for a decade — about $200 a month on average — and still returns 7.9% a year. The cash flow is the part you feel and the smallest part of the answer; the tenant repaying $47,955 of your loan and the market adding $99,289 are where the return actually comes from. Two caveats worth holding onto. Set appreciation to 0% and the total profit falls to roughly $38,000, an annualized 2.8% — so more than two thirds of this return is an assumption about the future, not a fact about the building. And the sale itself has a tax bill this projection does not net out: at these figures the depreciation recapture alone is around $19,000.
Definitions
- Total return
- Cash flow, principal paydown, appreciation and tax savings combined, less the cash you put in.
- Annualized return
- The compound yearly rate that turns your invested cash into its ending value over the hold.
- Principal paydown
- The loan balance reduced by rent. Equity built by your tenant rather than by the market.
- Appreciation
- Growth in the property's value. The weakest assumption in any projection and often the largest component.
- Equity at sale
- Sale value less selling costs less the remaining loan balance — what the sale actually delivers.
- Selling costs
- Commission, transfer taxes, title and concessions. Six to ten percent of the sale price all in.
- Gross gain
- The four return components before subtracting the up-front closing and rehab.
- Crossing point
- The year cumulative profit turns positive. The practical minimum holding period.
- Operating expense ratio
- Operating costs as a share of rent. Commonly 35% to 50%, and it compounds over a long hold.
- Holding period
- How long you keep the property. The input that changes this answer most.
- Depreciation tax shield
- Tax saved by the depreciation deduction. Real return, and recaptured at sale.
- Recapture
- Tax at up to 25% on accumulated depreciation when the property is sold. Not netted out of this projection.
Good to know
Four returns, and the biggest one is not cash
Over a ten-year hold on these inputs the property produces $137,250 of profit, and cash flow contributes negative $24,318 of it. The rest comes from $47,955 of principal paid down by the tenant and $99,289 of appreciation after selling costs. That composition is typical of a leveraged rental bought at current rates, and it explains why investors who evaluate only cash flow reject deals that work and investors who evaluate only appreciation buy deals that do not survive. The annualized figure — about 7.9% a year on the $120,000 of cash invested — is what makes the comparison against an index fund honest. It is a real return, earned with real risk and real work, and it is not obviously better than the alternative, which is the correct conclusion to be able to reach before buying rather than after.
Ten years of negative cash flow is a funding requirement
The most important line here is the one that is negative. Losing $24,318 of cash over the hold means roughly $200 a month must come from somewhere other than the property, every month, for a decade — and it must come in the months when the furnace fails too. That is not automatically a bad deal; it is a deal that requires capital beyond the down payment, and the investor who has not planned for it is the investor forced to sell in the worst possible year. It also means the appreciation assumption is doing all the work. At 3% a year, appreciation contributes $99,289. At 1% a year the whole profit largely disappears, and at 0% the deal loses money. A property whose return depends on an assumption about the future should be sized so that being wrong about it is survivable.
The 50% rule as a sanity check on expenses
Operating expenses here are set at 40% of rent, and the widely used rule of thumb is 50% — half of gross rent goes to taxes, insurance, maintenance, management, capital reserves and vacancy, before any mortgage payment. The rule is crude and it is remarkably durable, because the individual lines vary enormously by property while the total does not. Setting expenses at 40% rather than 50% adds about $3,100 a year to the modelled cash flow, which over ten years is roughly $31,000 of the profit. A single-family rental in a low-tax state with a newer roof can genuinely run at 35%. An older multifamily building in New Jersey or Illinois can exceed 55%. The honest approach is to build the expense figure from the actual tax bill, an actual insurance quote and a real maintenance reserve, then check the result against 50% and explain any large gap.
Selling costs are the tax on the biggest component
Appreciation is gross $152,250 and net $99,289 after 8% of selling costs, which means about a third of it never reaches you. Eight percent is a realistic all-in figure — 5% to 6% of commission, transfer taxes, title and settlement fees, an owner's policy in some states, and whatever repairs the buyer negotiates. That drag is the strongest argument against short holds: on a three-year hold the same selling cost consumes a far larger share of a much smaller appreciation, which is why real estate rewards patience mechanically rather than philosophically. It is also why the 2024 NAR settlement matters to investors — buyer-agent compensation is now negotiated separately rather than assumed, and a point of commission on a $560,000 sale is $5,600 of return.
This is a pre-tax figure, in both directions
The $137,250 is before taxes, and tax cuts both ways. Working in your favour, depreciation shelters a share of the rental income each year, and losses may be deductible against other income if you qualify as a real estate professional or fall under the passive-loss allowance. Working against you, the sale triggers capital gains tax on the appreciation and unrecaptured section 1250 tax at up to 25% on every dollar of depreciation taken — the Depreciation Recapture Calculator prices that. A 1031 exchange defers both indefinitely by rolling into a replacement property, which is why so many long-term investors never sell outright. The net effect varies enough by bracket, state and structure that a projection like this one is best read as the pre-tax shape of the deal, with the tax layer priced separately against your own situation.
Frequently asked questions
What are the four ways a rental pays?
Cash flow, principal paydown by your tenant, appreciation, and the tax saved by depreciation. Most investors judge a deal on the first alone, which is usually the smallest — on these defaults it is negative while the total return is strongly positive.
Is a negative cash flow acceptable?
It can be, and this projection shows when. If appreciation and paydown outweigh it over your holding period, the deal makes money. The danger is liquidity rather than arithmetic: negative cash flow has to be funded every month, and a job loss during a vacancy is how those deals end badly.
How reliable is the appreciation assumption?
It is the weakest input on the page and it drives a large share of the answer. US home prices have averaged roughly 3% to 4% a year over long periods with severe local variation and multi-year declines. Run the projection at 0% and see whether the deal still works — if it does not, you are buying appreciation rather than real estate.
Why does the ring not sum to the headline?
Because they measure different things and the page says so. The ring shows gross gain: cash flow, paydown, appreciation and tax saved. The headline subtracts the closing costs and rehab you paid on day one and never got back. The difference between them is exactly that up-front cost.
Does this include the tax on the sale?
No, and that is a significant omission by design. Depreciation is recaptured at up to 25% and the gain above it is taxed as a long-term capital gain. Run the Depreciation Recapture Calculator on the sale figures before treating this profit as spendable.
What is a good annualized return?
Compare it against what the same cash would do elsewhere. A diversified stock portfolio has returned roughly 7% to 10% a year over long periods, with no tenants and no roof. A rental returning 8% annualized is doing fine; one returning 4% is a job you are paying for.
Why does the operating expense share matter so much?
Because it compounds over the whole hold. Moving from 40% to 50% of rent on a $2,600 rent is $3,120 a year, which over ten years with growth is more than $35,000 — larger than most people's estimate of the entire return.
Should I model rent growth and appreciation at the same rate?
They correlate over the long run but diverge for years at a time. Rent tracks incomes; prices track rates and sentiment. Running them at the same rate is a reasonable default and a poor forecast — try appreciation lower than rent growth to see the pessimistic case.
What does the crossing point on the chart mean?
The year cumulative profit turns positive — when everything you have received exceeds what you put in. Before that year, selling means taking a loss. It is the practical minimum holding period for the deal to have been worth doing.
Are selling costs really 8%?
Six to ten percent is the usual all-in range once commission, transfer taxes, title, attorney and seller concessions are counted. Post-2024, commission is more negotiable than it was, so the low end of that range is more achievable than it used to be.
Does this account for a refinance?
No — it assumes one loan held throughout. A refinance would change the payment and pull cash out, which the model cannot represent. For a buy-rehab-refinance strategy, use the BRRRR Calculator instead.
What is the biggest risk this does not model?
Concentration. This is one property in one market with one tenant. A model with smooth 3% growth cannot show a six-month vacancy, a tenant who stops paying, a special assessment, or a local employer closing — and all four happen.