Rental Property Calculator
Analyze the profitability of rental property investments
Rental Property Analysis
Key Investment Metrics:
Cash Flow
Monthly rental income minus all expenses (including mortgage). Positive cash flow means the property generates more income than it costs to own and operate.
Cap Rate
Annual net operating income divided by property price, expressed as a percentage. Measures profitability regardless of financing method.
Cash on Cash Return
Annual cash flow divided by total cash invested, expressed as a percentage. Shows the return specifically on your out-of-pocket investment.
One Percent Rule
A property passes the 1% rule if monthly rent is at least 1% of the purchase price. This is a quick screening tool for potential investment properties.
Income & Expense Tips
- Vacancy Rate: Typically 5-10%. Higher in areas with seasonal rentals or transient populations.
- Property Management: Usually 6-12% of collected rent, higher for short-term rentals.
- Maintenance: Budget 1-2% of property value annually or 5-10% of rent.
- Capital Expenditures: Set aside funds for major replacements (roof, HVAC, etc.).
- Property Taxes & Insurance: Research actual costs for the specific area, as they vary widely.
Property Types:
Single Family
A standalone residential property rented to a single tenant or family
Multi-Family
A property with multiple separate rental units (duplex, triplex, etc.)
Apartment Building
A larger multi-unit residential property with multiple tenants
Condo/Townhouse
An individually owned unit within a larger complex
Commercial
Property used for business purposes such as office, retail, or industrial
Short-Term Rental
Property rented for brief periods, typically as vacation rentals
Calculate Rental Property Returns
Property Information
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Financing Details
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Rental Income
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Monthly Expenses
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Long-Term Projections
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Rental Property Analysis Results
Monthly Cash Flow:
$0.00
Cash on Cash Return:
0.00%
Cap Rate:
0.00%
1% Rule:
0.00%Does not pass
Total Investment:
$0.00
Gross Rent Multiplier:
0.00
Monthly Rental Income:
$0.00(after 5% vacancy)
Monthly Expenses:
$0.00
Monthly Net Operating Income:
$0.00(before mortgage)
Monthly Mortgage Payment:
$0.00
Monthly Expense Breakdown
10-Year Projection
Projected Property Value:
$0.00
Projected Equity Gain:
$0.00
Projected Total Profit:
$0.00
Annualized Return:
0.00%
Profit Breakdown
Rental Property Investment Guide
What Makes a Good Rental Property?
Strong Cash Flow
Aim for properties with at least $200-300 in monthly cash flow after all expenses. This provides a buffer for unexpected costs and vacancies.
Good Location
Properties in areas with strong rental demand, low crime rates, good schools, and growing employment opportunities tend to perform better over time.
Reasonable Maintenance
Newer properties or those in good condition typically require less maintenance and have fewer costly surprises. Always budget for maintenance and capital expenditures.
Positive Investment Metrics
Look for properties with a cap rate above 5-6%, cash on cash return above 8%, and monthly rent that is at least 0.8-1% of the purchase price.
Common Investment Strategies
1
Buy and Hold
Purchase properties for long-term ownership, benefiting from both cash flow and appreciation. This strategy allows you to build equity over time while generating passive income.
2
BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
Purchase undervalued properties, renovate them to increase value, rent them out, refinance to pull out most or all of your initial investment, then repeat with another property.
3
House Hacking
Purchase a multi-unit property, live in one unit, and rent out the others. This allows you to offset your housing costs while building equity in a rental property.
4
Short-Term Rentals
Properties in tourist or business travel destinations can generate higher income through short-term rentals on platforms like Airbnb, though they typically require more management.
Understanding Key Investment Metrics
Cap Rate vs. Cash on Cash Return
Cap Rate evaluates the property's performance regardless of financing, using the full purchase price in the calculation. It's useful for comparing different properties. Cash on Cash Return only considers your actual cash invested (down payment plus other initial costs) and shows the return on your specific investment considering your financing. A good property might have a Cap Rate of 5-10% and a Cash on Cash Return of 8-12% or higher.
The 1% Rule and 50% Rule
The 1% Rule suggests that the monthly rent should be at least 1% of the purchase price for a property to be a good investment. The 50% Rule is a quick way to estimate expenses, assuming that about 50% of your rental income will go toward operating expenses (not including mortgage). While these rules provide quick screening methods, they should be supplemented with detailed analysis based on actual expected expenses.
Gross Rent Multiplier
The Gross Rent Multiplier (GRM) is calculated by dividing the property's price by its annual rental income. A lower GRM generally indicates a better value. For example, a property costing $200,000 with annual rental income of $24,000 has a GRM of 8.33. This metric can help you quickly compare similar properties in the same area, but doesn't account for differences in expenses.
Importance of Cash Reserves
Always maintain adequate cash reserves for each rental property—typically 3-6 months of expenses. This covers unexpected costs, vacancies, and major repairs. Without proper reserves, a single major repair or extended vacancy could force you to sell the property or take on high-interest debt, negatively impacting your investment returns.