What is a good cap rate for a rental property in 2026?

A cap rate of 5 to 7 percent is typical for stable markets and class B properties. Class A in expensive metros may yield 4 to 5 percent. Class C and value-add deals target 8 to 12 percent. With 2026 mortgage rates near 7 percent, anything below 6 percent cap rate creates negative leverage.

What's the difference between cap rate and cash-on-cash return?

Cap rate measures NOI divided by purchase price — it ignores financing. Cash-on-cash measures annual pre-tax cash flow divided by total cash invested (down payment plus closing costs). Cash-on-cash includes the effect of leverage; cap rate is leverage-neutral and used to compare properties.

What DSCR do lenders require for rental property loans?

Most DSCR loans require 1.20 to 1.25 minimum, meaning monthly NOI must be at least 120 to 125 percent of debt service. Some lenders go to 1.0 for strong borrowers. Below 1.0 means the property doesn't cover its own mortgage.

Should I count vacancy in my rental analysis?

Yes. Use 5 to 8 percent vacancy allowance in stable markets, 10 percent or higher in tougher rental markets. Also include 5 to 10 percent for repairs and 8 to 12 percent for property management even if you self-manage — your time has a cost.

What's a healthy monthly cash flow target per rental?

A common rule is $100 to $200 per door per month after ALL expenses (including reserves for capex and vacancy). Class A properties may have low or negative cash flow but stronger appreciation. Negative cash flow is a red flag unless you have a clear value-add plan.

Cap Rate Calculator (2026) — Rental Property Returns

The most important rental property metrics in one place: cap rate, cash-on-cash return, monthly cash flow, and DSCR (debt-service coverage ratio). Plug in the rent, expenses, and financing for any potential rental and get a clear yes/no verdict on whether it’s worth pursuing.

Cap Rate & Cash-on-Cash Return Calculator

Run the numbers on a rental property — cap rate, cash-on-cash return, and DSCR.

Property

Purchase price

Monthly gross rent

Expenses (annual)

Property tax

Insurance

Maintenance

Property mgmt (8% rent typical)

Vacancy (% rent)

Other (HOA, utilities)

Financing

Down payment (%)

Loan rate (%)

Loan term (years)

Cap rate

0.00%

NOI ÷ purchase price. Common benchmark: 6-10% in most US markets.

Annual NOI

Cash-on-cash return

Monthly cash flow

DSCR

0.00

Adjust inputs to evaluate the deal.

Find DSCR investor loans at competitive rates

Estimates only. Real investment returns depend on actual rent, expenses, financing, and tax treatment. Not financial advice — consult a CPA familiar with rental property tax.