Guide
How to analyze a rental property
Team RE Underwrite Lab
A plain order of work
Start with rent you believe you can collect, then subtract the income you will not collect and the expenses you will pay. What remains before the loan is a version of net operating income. The loan payment comes off after that if you want cash flow.
Cap rate compares that income with the price and ignores the loan. Cash-on-cash compares cash flow with the cash you invest. The 1% rule compares monthly rent with price and ignores expenses. They answer different questions. None of them is a decision by itself.
Formula
Cap rate = annual NOI ÷ price. Cash-on-cash = annual cash flow ÷ cash invested. Rent-to-price = monthly rent ÷ price.
The long-term rental calculator stacks rent, vacancy, expenses, and a loan, then shows year-1 cash flow, cap rate, and cash-on-cash. The single-ratio pages are there when you only want one division. You still type the inputs. The site does not look up rents.
Example
Example. Price $200,000 and annual NOI $14,000 is a 7% cap rate, because 14,000 ÷ 200,000 = 0.07. Price $200,000 and monthly rent $1,800 is a 0.90% rent-to-price ratio, and the rent that would equal 1% of that price is $2,000. These are example inputs, not a rental we operate.
Cash flow still depends on the loan and the expenses you have not typed on those two pages. Use the long-term rental calculator when you want those lines in the same sum.
Questions
Which ratio should I trust?
None of them alone. Cap rate ignores debt. Cash-on-cash ignores whatever you left out of cash flow. The 1% rule ignores expenses.
Does the site pull market rent?
No. You type the rent.
Are taxes and insurance in cap rate?
Only if you already removed them from the NOI you type. The cap rate page does not list expense lines.
What about short-term rentals?
Nightly stays, cleaning, and local rules are a different calculator. Do not drop an Airbnb guess into the long-term page and treat it as the same analysis.
Is a positive cash-flow figure a promise?
No. It is the result of the inputs. Vacancy, repairs, and the payment can all differ from what you typed.
Example only. Not financial, investment, legal, tax, lending, or appraisal advice.
Estimates only. Not financial, legal, tax, or investment advice. RE Underwrite Lab calculators and PDF reports provide educational estimates based on the numbers you enter. Actual purchase costs, rents, expenses, financing terms, taxes, insurance, vacancy, rehab costs, refinance eligibility, and returns vary by property, market, lender, and local law (including short-term rental rules). We do not guarantee any outcome, profit, cash flow, or appraisal. Some content and tools may be generated or assisted by artificial intelligence and can contain errors. Always verify assumptions with licensed professionals and your own due diligence before making decisions.