Rental Property Calculator

Rental property investment involves purchasing real estate with the intention of renting it out to tenants for income. Unlike other types of investments, rental properties can provide multiple streams of return: monthly cash flow from rental income, appreciation in property value over time, mortgage paydown as tenants essentially pay your loan, and tax benefits.

Successful rental property investment requires careful analysis of potential properties to ensure they will generate positive returns. Our calculator helps you evaluate a property's investment potential by calculating key metrics like cash flow, cap rate, cash-on-cash return, and return on investment.

Cash Flow

Cash flow is the monthly or annual difference between rental income and all expenses, including mortgage payments. Positive cash flow means the property is generating more income than it costs to own and maintain. Negative cash flow means you'd need to supplement the property with your own money each month.

Capitalization Rate (Cap Rate)

The cap rate is a property's net operating income (before mortgage payments) divided by its current market value, expressed as a percentage. It measures a property's profitability regardless of financing. Higher cap rates generally indicate higher returns but may also suggest higher risk. Most investors look for cap rates between 4% and 10%, depending on the property location and type.

Cash-on-Cash Return

Cash-on-cash return measures the annual pre-tax cash flow relative to the total cash invested, expressed as a percentage. It shows how efficiently your invested capital is working. Unlike cap rate, cash-on-cash return accounts for financing terms. Most investors aim for a cash-on-cash return of at least 8-12%.

Return on Investment (ROI)

ROI takes a more comprehensive view of returns by including cash flow, property appreciation, and equity build-up (mortgage principal paydown). Our calculator provides a 5-year ROI projection to help you understand the potential long-term performance of the investment.

When analyzing potential rental properties, it's crucial to account for all expenses to accurately estimate cash flow and returns. Common expenses include:

• Mortgage Payments: Monthly principal and interest payments on your loan.
• Property Taxes: Annual taxes assessed by local governments based on property value.
• Property Insurance: Annual premium for landlord insurance that protects your investment.
• Property Management: Fees for property management services, typically 8-12% of monthly rent.
• Maintenance: Ongoing repairs and upkeep, often estimated at 5-10% of annual rent.
• Vacancy: Periods when the property is unoccupied between tenants, typically 5-8% of annual rent.
• Utilities: Any utilities that you as the landlord are responsible for paying.