Rental property calculator

What this rental property calculator measures

A long-term rental is a hold, not a flip. You care whether the rent covers the mortgage and the operating costs, how that income compares with the price, and how the cash you actually wrote at closing is paid back. This rental property calculator puts those three ideas on one page: year-1 cash flow, cap rate, and cash-on-cash.

Cash flow here is the first year's cash flow after debt service, not a monthly teaser that ignores vacancy. Cap rate is year-1 net operating income divided by the purchase price when you have not entered rehab. Cash-on-cash is that same year's cash flow divided by the cash you invested. The three ratios answer different questions. A high cap rate can still be a poor cash-on-cash return if the down payment is small and the rate is high, or the reverse.

The free inputs are purchase price, monthly rent, and down payment percent. Closing costs, the interest rate, the term, vacancy, and the expense percents stay on the defaults so the formula in the next section matches the headlines. The paid long-term rental calculator is where rehab, growth, and the sale are edited.

Formula

The loan amount is the purchase price times one minus the down payment percent. Closing costs are the purchase price times the closing-cost percent. Cash invested is the down payment plus closing costs plus rehab. On the free sample rehab is zero, so cash invested is down payment plus closing costs. The payment is a standard amortizing payment on the loan amount, the annual rate, and the term.

Effective gross income is monthly rent times twelve times one minus the vacancy percent. Operating expenses add taxes, insurance, and HOA, then add maintenance, management, and capital reserves as percents of that effective income. NOI is effective income minus operating expenses. Cap rate is NOI divided by the purchase price when rehab is zero. If you later add rehab, the paid engine divides NOI by purchase plus rehab and marks the cap rate as all-in.

Annual debt service is the monthly payment times twelve. Year-1 cash flow is NOI minus debt service. Cash-on-cash is year-1 cash flow divided by cash invested. Later years, in the paid calculator, grow rent and expenses by the percents you set and can include a sale. The free headlines stop at year 1 on purpose. A sale-year IRR needs the hold and the selling cost, which are subscription inputs.

Example

Worked example

Illustrative example. Year-1 cash flow, cap rate, and cash-on-cash below are the rental sample. They are not a property this company owns.

The rental property calculator sample buys at $400,000 with 20% down, 2% closing costs, and no rehab. The loan is 7% for 30 years. Rent is $2,800 a month with 5% vacancy. Taxes are $3,600, insurance is $1,400, maintenance is 10% of effective rent, management is 8%, and capital reserves are 5%. Rent growth, expense growth, and appreciation are each 2% a year, and the sale in year 5 deducts 6% for selling costs. Year-1 cash flow is -$5,969. Cap rate, which is year-1 NOI divided by the purchase price when rehab is zero, is 4.89%. Cash-on-cash is -6.78%. Cash invested on this sample is $88,000, and the monthly principal-and-interest payment is $2,129.

Try a lower rent before you celebrate the sample. Cash flow moves almost one-for-one with rent after vacancy, because the debt payment does not care what the tenant pays. Try a larger down payment and cash-on-cash usually falls even when cash flow rises, because you divided a modestly better numerator by a much larger denominator. That is the trade the rental property calculator is for.

Contractor assumptions

The free sample sets rehab to zero. A turnkey rental still needs a turnover budget. If you have a contractor's number for paint, flooring, or a roof, that number belongs in rehab on the paid calculator, where it increases cash invested and, once it is above zero, moves the cap rate onto an all-in basis. Do not hide a known repair inside a higher rent.

There is no line-item cost estimator and no cost book. Maintenance, management, and reserves are percents of effective rent: 10%, 8%, and 5% on the sample. Those percents are not a property condition report. A house with a new roof does not get a discount unless you lower the percent. A house with deferred work does not get a warning unless you raise the rehab lump sum or the maintenance percent.

The calculator is an estimate from the numbers you type. It does not inspect the property, and it does not replace a lease, an insurance quote, or a tax bill. Taxes on the sample are $3,600 a year and insurance is $1,400. Replace both when you have the real bills.

Common pitfalls

Cap rate on this sample divides year-1 NOI by the purchase price and ignores the loan. A strong cap rate can still produce thin cash flow once principal and interest are in the year.

The free sample does not finance a rehab. Cash you will spend on work after closing is missing until you add it, and the cash-on-cash figure will not include it on its own.

What stays on the subscription

The full rental worksheet covers rehab, rate, term, vacancy, every expense percent, growth, appreciation, selling cost, hold length, and saved deals. The free rental property calculator keeps the defaults in the worked example and lets you move price, rent, and down payment. After the 48-hour trial, standard is $9.99 a month. Founding is $5.99 a month for the first 100 and stays there while that subscription is active.

Cap rate and cash-on-cash are not an appraisal and not a promise that a lender will use the same rent. Vacancy, taxes, and insurance vary by building. Verify them before you make an offer.

Questions