How much profit should you make on a rental property?

Short answer

Target $150–$300 of monthly cash flow per unit after all expenses including reserves, and an 8–12% cash-on-cash return. Anything under $100 per unit leaves no cushion for a single vacancy or a water heater replacement.

Rental profitability targets per unit

Metric	Target	Marginal
Monthly cash flow per unit	$150–$300	Under $100
Cash-on-cash return	8–12%	Under 5%
Operating expense ratio	35–45% of rent	Over 55%
Capex reserve	5–10% of rent	Skipped entirely
Vacancy allowance	5–8% of rent	Assumed zero

How to read this table

Monthly cash flow per unit sits at the top of the table ($150–$300) — under $100. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
Capex reserve anchors the bottom (5–10% of rent) — skipped entirely. Treat this as the conservative case you should still be profitable at.
The gap between the top and bottom row is roughly 60×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
Most rows are ranges, not single figures. The low end usually reflects a weaker month, a softer audience geography, or an unoptimised setup; the high end reflects a well-run, well-targeted operation of the same size.
With 5 reference points in the "rental profitability targets per unit" table, the fastest way to use this page is to find the closest row, take its target, then stress-test it ±30% before you build a plan on it.

Context

Most rental deals that lose money were modelled without reserves. Rent minus mortgage is not cash flow — a realistic model subtracts management, insurance, property tax, maintenance, vacancy and capital reserve, and that stack typically consumes 40–50% of gross rent on older single-family stock. Appreciation and principal paydown are real returns, but they are illiquid, so a property that only works if it appreciates is a speculation with a tenant attached. Underwrite to cash flow and treat everything else as upside.

What moves this number

Financing terms

Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.

True operating expense ratio

Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.

Vacancy and turnover

One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.

Local regulation

Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.

Methodology

Cash-flow modelling using the 50% expense rule as a sanity check against itemised operating costs, with cash-on-cash calculated on total cash invested including closing costs.

Assumptions and caveats

Returns exclude appreciation and principal paydown unless a row states otherwise.
Local tax, insurance and regulation can move these figures by several points in either direction.
This page was last reviewed on 2026-08-12. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.

Frequently asked questions