Cap rate is annual net operating income divided by the purchase price. What counts as 'good' depends on the market and risk: many investors look for 5–8%, with higher cap rates in secondary markets or for properties that need more management. Cap rate ignores financing, so it's best for comparing properties on equal footing rather than measuring your leveraged return.

Cash-on-cash return is your annual pre-tax cash flow divided by the actual cash you invested — down payment, closing costs, and any up-front rehab. Unlike cap rate, it accounts for financing, so it reflects the return on the money you actually put into the deal. Many buy-and-hold investors target 8% or more.

Cash flow is the money left each month after all expenses. Start with gross rent and other income, subtract a vacancy allowance to get effective gross income, subtract operating expenses (taxes, insurance, HOA, management, maintenance, and capital-expenditure reserves), which gives net operating income (NOI), then subtract the mortgage payment. What remains is your monthly cash flow.

The 1% rule is a quick screen: monthly rent should be at least 1% of the purchase price. A $200,000 property would need about $2,000/month in rent to pass. It's only a first-glance filter — a property can still cash flow well below 1% in low-tax, low-expense markets, or fail to cash flow above 1% where expenses are high.

Yes. Capital expenditures — roofs, HVAC, water heaters, appliances — are infrequent but expensive. Budgeting a monthly reserve (often 5–10% of rent) keeps those big-ticket replacements from wiping out years of cash flow. This calculator treats CapEx and maintenance as separate reserves so your NOI and cash flow stay realistic.