How to use the rental property calculator
- Enter the purchase price, your down payment as a percentage, and the closing costs in dollars.
- Enter the loan interest rate and term. Investment property loans usually cost more than loans for a home you live in.
- Enter the monthly rent and any other monthly income, such as parking or laundry.
- Enter the expected vacancy rate and the management fee as a percentage of the income collected (0 if you manage it yourself).
- Enter property tax and insurance per year, HOA fees per month, and maintenance as a percentage of the rent.
- Read the monthly cash flow, the investor ratios and the line-by-line income statement.
How the numbers are calculated
Net operating income (NOI) is what the property earns before financing, so it lets you compare properties regardless of how they are paid for. The cap rate is NOI as a percentage of the price, the yield you would get buying with cash. Cash-on-cash return is the yield on the cash you actually put in, after the mortgage. The calculator also shows the debt service coverage ratio (NOI ÷ mortgage payments), which lenders often want at 1.2 or more for investment loans, and the break-even occupancy needed to cover every cost.
Worked example
The defaults are a $300,000 property with 25% down, $9,000 closing costs, a 7% 30-year loan, $2,500 rent, 5% vacancy, 8% management, $3,600 tax, $1,400 insurance and 8% maintenance:
- Gross income: 2,500 × 12 = $30,000; vacancy 5% = $1,500; effective income $28,500
- Maintenance: 8% × 30,000 = $2,400; management: 8% × 28,500 = $2,280
- Operating expenses: 3,600 + 1,400 + 2,400 + 2,280 = $9,680
- NOI: 28,500 − 9,680 = $18,820 a year
- Loan: $225,000 at 7% for 30 years = $1,496.93 a month, $17,963.17 a year
- Cash flow: 18,820 − 17,963.17 = $856.83 a year, or $71.40 a month
- Cap rate: 18,820 ÷ 300,000 = 6.27%; cash-on-cash: 856.83 ÷ 84,000 = 1.02%
- Gross rent multiplier: 300,000 ÷ 30,000 = 10.0; the rent is 0.83% of the price, so it falls short of the 1% rule
The property pays its own way, but only just. At $3,000 rent the cash flow rises to $468.40 a month, and a 6% loan instead of 7% lifts it to $219.34.
Reading the results
| Measure | What it tells you | Common rough target |
|---|---|---|
| Cash flow | Money left each month after everything | Positive, with room for surprises |
| Cap rate | Return on the price, before financing | Compare with similar local properties |
| Cash-on-cash | Return on your cash, after financing | Higher than a safe savings rate |
| DSCR | How comfortably NOI covers the loan | 1.2 or more |
| 1% rule | Quick screen for rent vs. price | Rent ≥ 1% of price |
These are screening tools, not guarantees. The 1% rule is hard to meet in high-cost areas, where investors often accept lower cash flow in exchange for expected price growth. Year-one cash flow also leaves out the two other ways a rental pays: the principal your tenant's rent repays, and appreciation. The real estate calculator follows equity over the years you hold a property.
Common mistakes
Underestimating costs is the most common one. Budget for vacancy even in a strong market, since turnover between tenants takes time and money. Use 5% to 10% of the rent for maintenance on a newer home and more for an older one, and set aside money for big items such as a roof or furnace. Get a real insurance quote for a rental (landlord) policy, which costs more than a homeowner policy. Check the property tax after the sale, because many areas reassess at the new price.
Frequently asked questions
What is a good cap rate for a rental property?
There is no single number. Cap rates depend on the area, the property type and interest rates. Many single-family rentals trade at roughly 4% to 8%, with higher cap rates in cheaper or riskier areas. Compare a property with similar ones nearby rather than with a national figure.
Does NOI include the mortgage?
No. NOI is income minus operating expenses only. Mortgage payments come out afterward to give cash flow. Keeping them separate lets you compare properties whatever the financing.
Why is my cash-on-cash return so low?
Cash-on-cash compares cash flow with everything you put in. With a large down payment and a high loan rate, most of the rent goes to the mortgage, so the return on your cash is small even if the cap rate looks fine.
Is the 1% rule realistic?
It's a quick filter, not a rule. A rent of 1% of the price usually means the property can cover its costs and a mortgage. Many good properties in expensive markets fail it, and some that pass have high repair costs or vacancy, so always run the full numbers.
Related calculators
- Real Estate Calculator — A home as an investment: equity built, total paid, cash in hand if you sell, and your net gain after all costs.
- Mortgage Calculator — Your full monthly housing cost, including property tax, insurance, PMI and HOA fees.
- ROI Calculator — Return on investment as a percentage, the gain or loss, and the annualized ROI from a length or two dates.
- IRR Calculator — Internal rate of return, NPV and payback period for an investment and a series of yearly or monthly cash flows.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.