Land Rent Rate of Return Calculator

Renting out land, typically as cash rent to a farm operator, turns a passive holding into an income investment. Unlike farming it yourself, cash rent gives you a predictable annual payment without exposure to crop prices or yields, and the return combines that rent income with any appreciation realized when you eventually sell.

This calculator builds a year-by-year rate-of-return pro-forma for rented land: rent income net of expenses, financing, and taxes, plus the proceeds of a hypothetical sale, summarized as cash-on-cash return, NPV, and IRR.

How does this calculator work?

Enter the land purchase price and value, financing (up to two mortgages), the cash rent per acre and acreage, operating expenses, and a hypothetical sale year. The calculator builds a full year-by-year rate-of-return pro-forma for renting out land.

Cash rent grows every year at the rent appreciation rate you enter, and operating expenses (land maintenance, property taxes, and other costs) inflate separately at their own rate, so the two don't have to move in lockstep.

Interest on each of your mortgages is pulled from a full monthly amortization schedule, then summed into an annual figure. Unlike our Farmland calculator, this tool does not depreciate the land itself, since raw land isn't a depreciable asset, so there's no depreciation deduction reducing your taxable income.

Taxable income is simply net operating income minus interest, taxed at your marginal rate. A loss year floors the tax at zero rather than creating a benefit.

The calculator also tracks your loan balance and the land's appreciating value each year, giving you a loan-to-value ratio. At every single year, it separately models what selling that year would look like: the appreciated sale price, minus your remaining loan balance, minus selling costs, minus capital gains tax on the appreciation above your purchase price.

That sale proceeds figure is combined with every prior year's cash flow into an IRR on your original invested equity, which is why you can pick any hypothetical sell year and see its return immediately.

Headline results include year-1 cash-on-cash return and equity build-up, total future cash flow, NPV, and before- and after-tax IRR, so you can judge renting out land as an investment.

Worked example

Buy 200 acres at $6,000/acre ($1.2M), rent at $250/acre, partly financed, with a sale modeled after 10 years.

Land / price per acre

200 ac / $6,000

Cash rent

$250/acre/yr

Gross rent yield

4.17% of land value

Year-1 cash-on-cash

depends on financing

After-tax IRR (with sale)

the headline return

How the numbers work

Gross rent is straightforward: 200 acres × $250 = $50,000 a year, which is 4.17% of the $1.2M land value before expenses.

From that rent the model subtracts operating expenses, loan interest, and taxes to get annual after-tax cash flow, and divides the first year's by your invested cash for the cash-on-cash return.

The IRR then combines every year's cash flow with the net proceeds of the year-10 sale (after paying off financing and capital gains), so the headline return leans heavily on the sale price: most of land's total return is appreciation rather than rent.

At $250/acre on $6,000/acre land, the cash rent yields 4.17% before expenses, modest income that leans on appreciation for the bulk of the total return, which is why the sale assumption matters so much to the IRR.

Leverage amplifies both: financing part of the purchase can raise cash-on-cash return if rent covers the debt, but it also magnifies the downside if land values fall.