Investor Cheat Sheet
Dec 19, 2025
The rental property ROI calculator cheat sheet
Three formulas. Real numbers. And the one input that makes or breaks every deal analysis.
The problem
Why most ROI calculations are wrong
Every rental property ROI formula has the same dependency: rental income. Cap rate needs it. Cash-on-cash return needs it. Net yield needs it. Get the rent number wrong, and every metric you calculate is fiction.
Most investors plug in one of two numbers. The asking rent on Zillow. Or the "proforma" rent the seller included in the listing. Both are inflated. Zillow shows what landlords wish they could charge. Seller proformas exist to make deals look better than they are.
Being off by $200/month on rent changes a cap rate by over a full percentage point. It turns a 4.8% cash-on-cash return into 0%. It turns a buy into a pass. Or worse, a pass into a buy.
The formulas
3 ROI metrics every investor needs
1. Cap Rate
Cap Rate
Net Operating Income / Purchase Price
Cap rate tells you what return the property generates independent of financing. No mortgage math. Just the asset itself.
Worked example:
- Purchase price: $200,000
- Monthly rent: $1,500
- Monthly expenses: $500 (taxes, insurance, maintenance, management)
- Net Operating Income: ($1,500 − $500) × 12 = $12,000/yr
- Cap Rate: $12,000 / $200,000 = 6.0%
A 6% cap rate is solid in most markets. But notice the entire calculation hinges on that $1,500 rent figure. If actual market rent is $1,300, your NOI drops to $9,600 and your cap rate falls to 4.8%. Different deal entirely.
2. Cash-on-Cash Return
Cash-on-Cash Return
Annual Cash Flow / Total Cash Invested
Cash-on-cash measures the return on the actual dollars you put in. This is the metric that tells you how hard your down payment is working.
Worked example (with a bad rent estimate):
- Total cash invested: $50,000 (down payment + closing costs)
- Monthly rent (guessed): $1,500
- Monthly mortgage (P&I): $1,000
- Monthly expenses: $500
- Monthly cash flow: $1,500 − $1,000 − $500 = $0
- Cash-on-Cash Return: $0 / $50,000 = 0.0%
Same deal, accurate rent from comps:
- Monthly rent (actual market): $1,700
- Monthly cash flow: $1,700 − $1,000 − $500 = $200
- Annual cash flow: $200 × 12 = $2,400
- Cash-on-Cash Return: $2,400 / $50,000 = 4.8%
Same property. Same financing. A $200/month rent difference swung cash-on-cash from 0% to 4.8%. That is the difference between walking away from a deal and funding it.
3. Net Yield
Net Yield
(Annual Rent − Annual Expenses) / Property Value
Net yield is similar to cap rate but uses current property value instead of purchase price. Useful for evaluating performance on properties you already own, especially if the value has appreciated since you bought.
Worked example:
- Current property value: $240,000 (bought at $200K, appreciated)
- Annual rent: $1,700 × 12 = $20,400
- Annual expenses: $6,000
- Net Yield: ($20,400 − $6,000) / $240,000 = 6.0%
Net yield answers a simple question: is this property still earning its keep relative to what it is worth today? If your net yield drops below what you could earn elsewhere, it might be time to sell and redeploy.
The weak link
All three formulas share one vulnerability
Look at every formula above. Cap rate. Cash-on-cash. Net yield. Rental income is the numerator in all of them. It is the single largest variable in each calculation, and it is the one most investors get wrong.
Purchase price is a known number. Closing costs are known. Mortgage payment is known. Insurance and taxes are knowable. Rental income is the one variable that requires you to predict the market. And most people predict it badly.
Zillow asking prices
Zillow shows what landlords list, not what tenants pay. The units sitting on Zillow right now are the ones that have not rented yet. The correctly priced units already leased and disappeared. You are sampling from the overpriced tail of the distribution.
Seller proforma rents
A seller's proforma is a sales document, not a financial statement. It shows what the property could rent for under perfect conditions. Full occupancy. Top of market rent. No concessions. The seller wants you to see a great deal. Trust but verify means verify.
The $200/month error
On a $200,000 property, being off by $200/month on your rent estimate changes everything:
Guessed rent: $1,500/mo
- NOI: $12,000/yr
- Cap Rate: 6.0%
- Cash Flow: $0/yr
- Cash-on-Cash: 0.0%
Actual market rent: $1,700/mo
- NOI: $14,400/yr
- Cap Rate: 7.2%
- Cash Flow: $2,400/yr
- Cash-on-Cash: 4.8%
A $200/month rent error swings cap rate by 1.2 points and cash-on-cash by 4.8 points. That is not a rounding error. That is a completely different investment thesis.
The fix
Get the rent number right before you run the math
RentJudge gives you a comp-based rent estimate in about 2 minutes. Enter the address, upload a few photos, and you get a market rent number backed by real comparable properties with individual adjustments for amenities, condition, and structural differences.
No Zillow tab surfing. No trusting a seller's proforma. You get the number the market actually supports, then plug it into your ROI formulas knowing the foundation is solid.
Real comps, not asking prices
RentJudge pulls active listings and closed historical listings with their final listed price. You see what units actually rented for, not what landlords hoped for.
Visual AI condition scoring
Upload photos. AI detects granite counters, stainless appliances, hardwood floors, modern fixtures. Condition adjustments are baked into the estimate, not ignored.
ML-powered adjustments
Each comp gets individually adjusted for AC, laundry, parking, pet policy, square footage, year built, and condition. Machine learning trained on real listing data. Not gut feeling.
Side by side
The same deal, two rent estimates
3BR/2BA single family in a B-class neighborhood. Listed at $210,000. You need $52,500 cash to close. Monthly mortgage: $1,050. Monthly expenses: $550 (taxes, insurance, maintenance, management). Here is how your analysis plays out depending on where you get your rent number.
Monthly rent
Monthly cash flow
Annual NOI
Cap rate
Cash-on-cash return
Your decision
The Zillow rent was based on two overpriced active listings. The RentJudge estimate used 8 comps including closed listings, with ML adjustments for the property's in-unit laundry and updated kitchen. Same deal. Completely different conclusion.
Run the numbers with a rent estimate you can trust
Get a comp-based, AI-adjusted rent estimate in 2 minutes. Free. Then plug it into your cap rate, cash-on-cash, and net yield formulas knowing the input is solid.
Get Your Free Rent EstimateRentJudge provides automated rent estimates for informational purposes only. ROI calculations shown are examples and will vary based on actual property financials. Always consult with a financial advisor before making investment decisions.