$13,164.00
5.27
%
-$150.44
-$1,805.31
-2.89
%
$1,990.44
$13,164.00
5.27
%
-$150.44
-$1,805.31
-2.89
%
$1,990.44
The Rental Property Calculator analyzes the financial performance of an investment property by calculating key metrics including Net Operating Income (NOI), Cap Rate, Cash Flow, and Cash-on-Cash Return. These metrics are essential for evaluating whether a rental property is a sound investment.
Net Operating Income (NOI) is the property's annual income minus operating expenses (but before mortgage payments). It represents the property's earning power independent of financing. Operating expenses include property taxes, insurance, maintenance (typically 10% of rent), property management fees (8-12%), and vacancy losses (5-10% of gross rent).
The Cap Rate (capitalization rate) = NOI ÷ Purchase Price × 100. It measures the property's return as if purchased with all cash. Cap rates vary by market and property type — a rate of 5-10% is typical for residential rentals, with higher cap rates indicating higher potential returns (and often higher risk).
Cash Flow is what remains after all expenses and mortgage payments. Positive cash flow means the property generates income beyond all costs. Negative cash flow means you must contribute money each month, which may still be acceptable if the property appreciates and builds equity.
Cash-on-Cash Return = Annual Cash Flow ÷ Total Cash Invested × 100. This measures the return on your actual out-of-pocket investment (down payment and closing costs). A cash-on-cash return of 8-12% is generally considered good for residential rentals. This calculator helps you evaluate these metrics before purchasing an investment property.
Effective Gross Income = Monthly Rent × 12 × (1 − Vacancy Rate)
Operating Expenses = Taxes + Insurance + Maintenance + Management
NOI = Effective Gross Income − Operating Expenses
Cap Rate = NOI ÷ Purchase Price × 100
Cash Flow = NOI − Annual Mortgage Payments
Cash-on-Cash Return = Cash Flow ÷ Down Payment × 100
A positive monthly cash flow means the property pays for itself with income to spare. The cap rate helps compare properties regardless of financing. Cash-on-cash return shows your actual ROI on money invested. A 1% rule (monthly rent >= 1% of purchase price) is a quick screening test — properties meeting this rule often cash flow positively.
Inputs
Results
Barely breaks even at 0.8% rent-to-price ratio. Consider negotiating a lower price or higher rent.
Inputs
Results
Strong 1.1% rent-to-price ratio. Positive cash flow with 10.4% cash-on-cash return.
For residential rentals, 5-10% is typical. Higher cap rates (8-10%+) indicate better income relative to price but may signal higher risk or less desirable locations. Class A properties in prime areas may have 3-5% cap rates.
The 1% rule states that monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. This is a quick screening tool, not a guarantee of profitability.
5-10% is typical for residential rentals in decent markets. Higher vacancy rates (10-15%) may apply in seasonal markets, student housing, or areas with high competition. Never assume 0% vacancy.
Capital expenditures (roof, HVAC, appliances), vacancy between tenants, property management, legal costs, and rising property taxes. Budget 1-2% of property value annually for capital reserves.
Property managers typically charge 8-12% of collected rent. They are worthwhile if you have multiple properties, live far from the property, or do not want to handle tenant issues. Self-managing saves the fee but requires time.
Cash-on-cash return = annual cash flow ÷ cash invested. It measures the return on your actual investment (down payment + closing costs), not the total property value. 8-12% is considered good for residential.
Not necessarily. If the property appreciates and builds equity through mortgage paydown, total return may still be positive. However, negative cash flow requires contributing money each month, which adds risk.
Using a mortgage (leverage) amplifies both gains and losses. If the property appreciates, your return on equity is magnified. If it depreciates, you can lose more than your investment. Higher leverage = higher risk and potential reward.
Depreciation (deducting the building value over 27.5 years), mortgage interest deduction, expense deductions, and potential 1031 exchange for deferring capital gains on sale. Consult a tax professional.
Look for properties below market value (foreclosures, estate sales), in appreciating neighborhoods, with strong rent-to-price ratios (1%+ rule), and near employment centers, schools, and transportation.
Roboculator Team
The Roboculator Team explains calculations, planning tools, and practical formulas in clear language for real-life situations.
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