The Real Cost of a Rental Property at 7.5% Rates (2026 Math)

If you’re shopping for a rental property in 2026, the first number that hits you is the interest rate. Conventional loans are sitting at 7.5%. Hard money lenders are asking 12%. Those aren’t the rates from three years ago. They change the math on every deal you look at.

Let’s run the numbers on a typical rental property and see what actually matters. No fluff. Just the math that decides if you make money or bleed it.

The Baseline Deal

Say you find a three-bedroom, two-bath rental in a mid-tier suburban market. Purchase price: $350,000. You put 20% down ($70,000). The loan amount is $280,000 at 7.5% for 30 years. Your monthly principal and interest payment is $1,958.

But that’s just the start. You’ve also got property taxes at 1.2% of value per year ($4,200 annually, or $350/month). Insurance runs about $1,200 a year ($100/month). Together, your fixed costs are $2,408 per month before you even turn on a light.

Rent in this market? Call it $2,800 per month. On paper, that looks like a $392 positive cash flow. That’s a 6.7% cash-on-cash return on your $70,000 down payment. Not terrible. But that’s before reality kicks in.

Where the Math Gets Real

Vacancy hits everyone. Even good properties sit empty 5% to 8% of the time. At 7% vacancy, that $2,800 rent drops to $2,604 per month on average. Now your cash flow is $196.

Maintenance is the silent killer. Budget 1% of property value per year. That’s $3,500 annually, or $292 per month. Now your cash flow is negative $96. You’re losing money every month.

Property management at 8% of collected rent? That’s $208 monthly. Now you’re at negative $304 per month.

This is why the Rental Property Calculator is where you start every deal. Punch in your numbers before you make an offer. A $350,000 property at 7.5% might look fine until you add the real costs. That tool will show you exactly where the cash flow breaks.

The NOI Tells the True Story

Net Operating Income (NOI) is the number lenders care about. It’s your rent minus all operating expenses—taxes, insurance, management, maintenance, vacancy—but before the mortgage payment.

For our example: $2,800 rent minus $350 taxes, $100 insurance, $208 management, $292 maintenance, $196 vacancy reserve = $1,654 NOI per month. Annual NOI: $19,848.

Compare that to your annual debt service of $23,496 ($1,958 x 12). You’re $3,648 in the hole. That’s a negative cash flow property at 7.5%.

The NOI Calculator lets you adjust each expense line. Change the vacancy rate from 7% to 5%, and you gain $672 a year. Drop maintenance to 0.5%? Another $1,750. But don’t fudge numbers to make a deal work. Use conservative figures. The calculator won’t lie to you.

DSCR Loans and Hard Money

If you’re using a DSCR loan in 2026, lenders want a Debt Service Coverage Ratio of at least 1.20. That means your NOI must be 20% higher than your debt payment.

Our property has an NOI of $19,848 and debt service of $23,496. DSCR is 0.84. No lender touches that. You’d need either a lower price, more down payment, or higher rent.

Hard money at 12% makes it worse. On the same $280,000 loan, monthly payment jumps to $2,880. Annual debt service is $34,560. Your NOI doesn’t cover half of it. Hard money is for flips, not holds. If you’re buying a rental with hard money, you’re making a mistake unless you have an exit in six months.

The DSCR Calculator will tell you instantly if a property qualifies. Input your NOI and loan terms. If the ratio is below 1.20, walk away or renegotiate.

Cash-on-Cash Return Is What You Live On

Cash-on-cash return measures your actual cash profit against your cash invested. For our example with $70,000 down and negative $3,648 annual cash flow, your cash-on-cash is negative 5.2%. You’re losing money.

But change one variable. Buy at $320,000 instead of $350,000. Same rent, same expenses. Now your down payment is $64,000, and your loan is $256,000. Monthly payment drops to $1,790. Annual debt service is $21,480. NOI stays $19,848. Now you’re at $1,632 negative annual cash flow. Still negative, but less.

Find a property where rent is $3,200 instead of $2,800. NOI jumps to $24,648. Debt service at $21,480. Positive cash flow of $3,168. Cash-on-cash return of 4.5%. That’s a deal worth doing.

The Cash-on-Cash Calculator lets you test these scenarios fast. Adjust purchase price, down payment, rent, and expenses. See where the return lands before you make an offer.

Vacancy Rate Is the Biggest Variable

Most investors underestimate vacancy. In a hot market, 3% vacancy. In a slower market, 10% or more. The difference is huge.

At 3% vacancy, our $2,800 rent property generates $2,716 monthly. At 10%, it’s $2,520. That’s $196 per month difference. Over a year, $2,352. That’s the difference between a positive and negative cash flow property.

The Vacancy Rate Calculator helps you figure out what rate matches your market. Pull data from local rental associations or property managers. Don’t guess. A 2% error in vacancy can wipe out your entire return.

What 2026 Rates Mean for Your Strategy

At 7.5% conventional and 12% hard money, you can’t buy average deals. You need properties that cash flow with those rates. That means one of three things: