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There is no single good return. ROI on a rental is a set of metrics, each answering a different question. Compare the one you actually computed to the cost of the cash and the loan you are using, not to a round number you heard on a podcast.
By RentalAnalytics Editorial Team · Published September 14, 2026
ROI means return on the capital you care about, expressed as a percentage. On rentals, people use the same three letters for three different fractions. Cap rate is net operating income divided by purchase price. Cash-on-cash is cash flow after debt service divided by cash invested. A longer total-return view also counts principal paydown and whatever you realize when you sell, after selling costs.
Those are not interchangeable. A deal can look fine on cap rate and weak on cash-on-cash if the loan is expensive. The reverse is also true if you put a large down payment on a thin-yield property. Before you ask whether an ROI is good, write the formula you used.
This article does not pick a national target return. It shows how to read the metrics you already have against official rent, vacancy, and mortgage-rate context. For the levered identity itself, see our cap rate vs. cash-on-cash guide.
Because the hurdle depends on what the cash could otherwise do, how the deal is financed, and which risks you are taking. A 5% unlevered cap rate in a low-vacancy market is not the same decision as a 5% cash-on-cash figure on a thin-equity loan. One is a property yield. The other is a financing result.
Official data shows why a copied target is a poor screen. The National Association of Realtors put the U.S. median existing-home price at $434,100 in July 2026.[1] Census Bureau data analyzed by USAFacts put national median monthly rent at about $1,487 in 2024, or $17,844 a year.[2] $17,844 divided by $434,100 is about 4.1% gross yield before vacancy, taxes, insurance, maintenance, or debt.
That 4.1% is not a deal-level ROI and not a recommended target. It blends every home type sold with every rental type rented. It does show the direction of the market: a year-one cash return that ignores expenses and the loan will look richer than what most financed purchases can clear after a full P&L.
Start with the cash cost you actually pay, then with a public rate you can cite. Freddie Mac's Primary Mortgage Market Survey put the 30-year fixed average at 6.76% as of September 10, 2026, up from 6.71% the prior week and 6.35% a year earlier.[3] On a levered purchase, that rate is a cash outflow through debt service. On an all-cash purchase, it is one public benchmark for what similar long-term credit costs.
If year-one cash-on-cash sits below the rate on the loan, leverage is not helping the income statement in year one. The deal can still be a hold for other reasons, including later rent, a planned refinance, or a 1031. Those reasons need to be named. They are not hidden inside a single ROI percentage.
Vacancy belongs in the same comparison. The Census Bureau Housing Vacancy Survey put the national rental vacancy rate at 7.3% in the second quarter of 2026, and wrote that "National vacancy rates in the second quarter 2026 were 7.3 percent for rental housing and 1.2 percent for homeowner housing."[4] A return that assumes full collection is not the same metric as a return that subtracts vacancy first.
From a market-rent estimate, not from a voucher schedule labeled as market. On this site, estimated market rent is a HUD FY2026 50th-percentile plus Census ACS blend. HUD publishes the 50th-percentile series separately and states that those figures are not Fair Market Rents.[5] ACS table B25031 is median gross rent by bedrooms at the ZCTA, an occupied-unit median with a published margin of error, not asking rent.[6]
HUD Fair Market Rent stays the labeled 40th-percentile / voucher number. We do not call FMR market rent, and we do not use a listing-scrape product as the hero rent. The rent estimator runs the HUD 50th-scaled ZIP estimate and shows FMR beside it. Use the market estimate, or in-place rent, in the ROI model. Use FMR when you are talking about voucher payment standards.
Match the metric to the decision. Use cap rate to compare properties without mixing loan terms. Use cash-on-cash to see what your down payment and closing costs earn in year one. Use a multi-year total-return view only when you are willing to state hold period, exit costs, and rent-growth assumptions as scenarios, not as forecasts.
| Metric | Numerator | Denominator | Best use |
|---|---|---|---|
| Cap rate | NOI | Purchase price | Compare properties, ignore financing |
| Cash-on-cash | Cash flow after debt | Cash invested | Year-one yield on your cash |
| Gross yield | Annual rent | Price | Fast screen, before expenses |
| Total return | Cash flow plus equity change | Cash invested | Hold-period scenario, not a quote |
Gross yield is the inverse of gross rent multiplier. It is a screen, not a profitability test. Cap rate needs operating expenses. Cash-on-cash needs the loan. None of those identities is a promise about later sale prices.
The cash flow analyzer and the cap rate calculator take the same purchase, rent, vacancy, and expense inputs and return the income metrics without blending them into one unofficial after-tax ROI. This article is education on how to read those numbers. It is not advice to buy, hold, or target a specific return.
There is no single good ROI. ROI is a family of metrics: cap rate on the property, cash-on-cash on your cash in, and a longer total-return view that also counts principal paydown and later sale proceeds. A useful test is whether the metric you chose beats the cost of the capital you are using.
Cash-on-cash is one ROI measure: annual cash flow after debt service divided by cash invested. It is not the same as cap rate, which ignores the loan, and it is not a total-return figure that includes appreciation or sale proceeds. Name the metric before you compare two deals.
Only as a sanity check on how tight price-to-rent is, not as a deal underwrite. A national blend mixes every home sold with every unit rented. Underwrite the property with a HUD 50th-percentile plus Census ACS rent estimate, local comps, and a full expense and loan model.
Not as a stand-in for market rent. HUD Fair Market Rent is a 40th-percentile voucher schedule. For a statistical median, use HUD 50th-percentile rents blended with Census ACS, then confirm with comps. Keep FMR labeled as the 40th / voucher number.
The loan rate is a cash cost on levered deals and a useful comparison for unlevered ones. When the 30-year fixed average sits in the mid-6 percent range, a thin cash-on-cash figure can still be a pass if your goal is something other than year-one cash, but it is not a strong income screen.
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