Rental Property Calculator | Easily Calculate Cash flow and Cash-On-Cash Return
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Our rental property calculator was designed for beginner and advanced real estate investors to get a quick and simple snapshot of potential profit from a rental property without a spreadsheet.
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Rental Investment Calculator
Purchase Information
Rental Income
Fixed Rental Expenses
Variable Rental Expenses
What Is a Good Return for a Rental Property?
A “good” real estate investment return depends on the individual investor’s goals and objectives.
Investors are often looking for cash flow. Others are just looking to break even with investment cash flow. They make money by increasing the value of their investment property and claiming tax deductions.
Aiming to get a return on cash of at least 15% for these properties. Looking for deals where it can refinance, then withdraw all the capital after finishing renovations and leased (the BRRRR Strategy).
When looking for good deals in nicer neighborhoods, look for investment properties which meet the 1% rule. This means that the monthly rent is 1% higher than the price of the house and the cash-on-cash return is above 8.5%.
The 1% rule should not be used as a standard and does not apply in all markets. You should disregard it for any rental that is less than $1000. Instead, aim for 2% to make a deal work.
It will also depend on the type of property you are buying for rental income. Buying apartment complexes will have a different “good return” compared to a single family home. Jump up to our rental property calculator.
Do Expenses Change On Bigger Rental Properties?
The most common mistake new investors make involves not accurately modeling their property investment expenses. This is largely due to some of the advice that I’ve seen, which recommends simply modeling a certain percentage of rent for capital expenditures and repairs.
It is a very dangerous way to model rental properties, and it will almost always go wrong.
One property could rent for $2,500, while the other might only rent for $700. If we used the “standard” 10%, then one property would have an escrow for repairs of $3,000 per year, while the other property would only have $840. That’s why it’s important to input accurate values into the rental property calculator.
To use this model effectively, you must be able to accurately predict your rentals expenses. This was the most difficult thing for me to understand when I was a novice investor.
You will eventually be able, with time, to analyze pictures of an online listing and determine the property’s condition, as well as what repairs will need to be made in the future. This information can then be added into the model.
See the graph above to see how this can be done and read some articles below on how you can accurately predict renovations and repairs expenses. Jump up to our rental property calculator.
Cash-on-Cash Return vs Capitalization Rate
Real estate investors will often debate which metric is more important: Cash-on-cash return or cap rate. Our rental property calculator shows you both.
They are both very important, but for different reasons. Depending on the goals for your investment, one metric will be more important than the other.
Cash-on-cash return is a great metric for investors that are looking for cash flow, as it’s easy to understand that a 20% cash-on-cash return of a $100,000 investment yields $20,000 per year.
It’s also easy to compare to the stock market, although this can be a bit misleading, as real estate income is generally tax advantaged compared to dividends earned in the stock market, and doesn’t take appreciation into account.
However, more experienced investors often focus on cap rate, as it allows them to make a larger amount of money faster. One simple way to think about investment cap rate is the amount an investor will pay today for a future revenue stream.
If you buy a rental property that trades at an 8% cap rate, then raise the net operating income of the rental property by $5,000, you can divide that by the 8% cap rate. You’ve just generated $62,500 in value!
Good investors that are able to increase net operating income (NOI) are often able to achieve several years of cash flow in value created through forced appreciation.
Personally, look for investment properties that cash flow when buying them, and have tons of room to increase income, so you can benefit from forced appreciation and capture that equity through a refinance in the future. Jump up to our rental property calculator.
Rental Property Glossary Key Terms
Cap Rate
Capitalization rate, or cap rate for short, is the annual yield of a rental property – What percentage of the purchase price would it return every year if you purchased it in cash
Cash flow
cash flow refers to the net amount of money generated from rental properties after deducting expenses such as mortgage payments, maintenance costs, and taxes.
Cash-on-cash return
cash-on-cash return is a measure of the profitability of a rental property, calculated by dividing the annual cash flow generated by the rental property by the initial investment
Net Operating Income (NOI)
NOI is how much income does the rental property generate after all non mortgage expenses
Debt Service Coverage Ratio
Debt Service Coverage Ratio or DSCR is how much free cash is available to pay debt obligations.
Gross Rent Multiplier (GRM)
Gross Rent Multiplier or GRM is the number of years it takes for a property’s gross rents to equal the purchase price.
Amortization Term
amortization term he total length of time it takes to payoff a loan
Vacancy Rate
vacancy rate is the percentage of the time is your rental property vacant
ROI
ROI stands for Return on Investment, and it is a measure used to evaluate the profitability and efficiency of an investment by comparing the gains or benefits to the initial cost or investment.
Passive income
passive income is earnings generated with minimal effort or active involvement, often derived from investments, rental properties, or recurring revenue streams.
Property tax
property tax is a tax levied on the value of real estate or personal property owned by an individual or entity, typically used to fund local government services and infrastructure.
Rate of return
rate of return is the percentage gain or loss on an finance investment relative to the amount of money invested.
IRR
IRR stands for Internal Rate of Return and refers to the rate at which an investment generates a net present value of zero.
Landlord
landlord is an individual or entity who owns and rents out rental property to tenants in exchange for monetary compensation.
Income tax
income tax related to rental income is a tax imposed on the profit earned from renting out a rental property or receiving rental payments.
Property Management
property management is the oversight, advertising, operation, lease renewals and administration of real estate rental properties on behalf of owners, ensuring their effective and efficient use while maintaining their value. Property management fees is the combined total cost to manage by a property management company.
Current Market Home Value
The current market value is the estimated price at which a property would sell in the current real estate market.
Mortgage Expenses
Mortgage expenses refer to the property owners costs associated with obtaining and maintaining a mortgage loan, including interest payments, closing costs, and insurance.
Rental Property Calculator
What are the benefit of using a rental property calculator?
The benefit of using a rental property calculator before an investment is that it allows you to accurately analyze the potential profitability of a rental property by calculating expenses, rental income, and cash flow.
How to estimate Airbnb income for a rental investment property?
Use our free Airbnb rentalizer to get estimates for a specific investment address
What’s the tax impact of selling rental properties?
The tax impact of selling a rental property is that it may result in capital gains taxes being owed on any profit made from the sale.
How to estimate rent income for a rental investment property?
Use our rental income calculator to get estimates for a specific investment zip codes. Or find rental estimates on any property page. Jump up to our rental property calculator.