🏘️ Rental Property Calculator
Calculate rental property investment returns
Expected vacancy percentage
% of effective rent
How to Use This Calculator
Enter Property Details
Input the purchase price, down payment percentage, interest rate, and loan term for the rental property.
Enter Rental Income
Input the expected monthly rent, vacancy rate (expected percentage of time vacant), and operating expenses as a percentage of effective rent.
Review Investment Returns
See monthly cash flow, cap rate, cash-on-cash return, NOI, and other key metrics to evaluate the rental property investment.
Formula
Effective Rent = Annual Rent × (1 - Vacancy Rate)
NOI = Effective Rent - Operating Expenses
Cash Flow = NOI - Debt Service
Cap Rate = (NOI / Purchase Price) × 100
Cash-on-Cash Return = (Cash Flow / Down Payment) × 100
Example: $300,000 Rental Property
Purchase Price: $300,000, Down Payment: 20% ($60,000)
Monthly Rent: $2,000, Vacancy: 5%, Operating Expenses: 30%
Annual Rent: $24,000
Effective Rent: $22,800 (after 5% vacancy)
Operating Expenses: $6,840 (30% of effective rent)
NOI: $15,960
Debt Service: ~$17,280/year
Cash Flow: -$1,320/year (negative cash flow)
Cap Rate: 5.32%
About Rental Property Calculator
The Rental Property Calculator is an essential tool for real estate investors to evaluate rental property investments and calculate key investment metrics. This calculator helps you determine cash flow, cap rate, cash-on-cash return, net operating income (NOI), and other important metrics to assess whether a rental property is a good investment. Understanding these metrics is crucial for making informed investment decisions and comparing different rental property opportunities.
Understanding rental property returns is crucial for investors because rental properties can be excellent investments, but they require careful analysis to ensure profitability. This calculator helps you see the true financial performance of a rental property by accounting for vacancy rates, operating expenses, debt service, and other costs. Positive cash flow indicates the property generates more income than expenses, while negative cash flow means you'll need to cover the shortfall. Cap rate and cash-on-cash return help you compare different investment opportunities and understand the return on your investment.
This calculator is valuable for real estate investors who want to evaluate rental property investments, compare different properties, and make informed investment decisions. It helps you understand cash flow, which is the money left over after all expenses, including mortgage payments. It also calculates cap rate, which measures the property's return based on purchase price, and cash-on-cash return, which measures the return on your actual cash investment (down payment). By calculating these metrics, you can identify profitable investments, avoid money-losing properties, and build a successful rental property portfolio.
When to Use This Calculator
- Property Evaluation: Evaluate rental property investment opportunities
- Investment Analysis: Analyze cash flow and returns for rental properties
- Property Comparison: Compare different rental property investments
- Financial Planning: Plan for rental property investments
- Portfolio Building: Evaluate properties for your rental portfolio
- Due Diligence: Perform financial analysis before purchasing
Why Use Our Calculator?
- ✅ Comprehensive Analysis: Calculate all key rental property metrics
- ✅ Cash Flow Calculation: See monthly and annual cash flow
- ✅ Investment Returns: Calculate cap rate and cash-on-cash return
- ✅ Free Tool: No registration or fees required
- ✅ Real Estate Investing: Essential for rental property investors
- ✅ Mobile Friendly: Calculate on any device
Understanding Rental Property Metrics
Cash flow is the money left over after all expenses, including mortgage payments, operating expenses, and vacancy losses. Positive cash flow means the property generates more income than expenses, while negative cash flow means you'll need to cover the shortfall. Cap rate (capitalization rate) measures the property's return based on purchase price, calculated as NOI divided by purchase price. Cash-on-cash return measures the return on your actual cash investment (down payment), calculated as annual cash flow divided by down payment.
Net Operating Income (NOI) is the property's income after operating expenses but before debt service. It's calculated as effective rent (after vacancy) minus operating expenses. Operating expenses typically include property management, maintenance, repairs, insurance, property taxes, utilities (if paid by landlord), and other costs. Vacancy rate accounts for expected periods when the property is unoccupied. Understanding these metrics helps you evaluate rental property investments and make informed decisions.
Real-World Applications
Property Evaluation: An investor is evaluating a $300,000 rental property with $2,000/month rent. The calculator shows negative cash flow of -$110/month, a 5.32% cap rate, and -2.2% cash-on-cash return, indicating this may not be a good investment without rent increases or expense reductions.
Property Comparison: An investor compares two properties: Property A has 6% cap rate and 8% cash-on-cash return, while Property B has 5% cap rate and 12% cash-on-cash return. Property B offers better cash-on-cash return despite lower cap rate, helping them make an informed decision.
Investment Planning: An investor wants to build a portfolio of cash-flowing properties. They use this calculator to identify properties with positive cash flow and good returns, ensuring their investments generate income.
Important Considerations
- Cash flow can be negative, especially in high-priced markets
- Cap rate and cash-on-cash return vary by market and property type
- Operating expenses typically range from 25-50% of effective rent
- Vacancy rates vary by location, property type, and market conditions
- Consider property appreciation and tax benefits in addition to cash flow
- Factor in maintenance, repairs, and unexpected expenses
Frequently Asked Questions
What is cash flow in rental property?
Cash flow is the money left over after all expenses, including mortgage payments, operating expenses, and vacancy losses. Positive cash flow means the property generates more income than expenses, while negative cash flow means you'll need to cover the shortfall from other sources.
What is a good cap rate for rental property?
A good cap rate varies by market and property type, but generally, cap rates of 5-8% are considered reasonable for residential rental properties. Higher cap rates indicate higher returns but may come with higher risk. Compare cap rates to similar properties in your market for context.
What is cash-on-cash return?
Cash-on-cash return measures the return on your actual cash investment (down payment), calculated as annual cash flow divided by down payment. For example, if you invest $60,000 (20% down) and generate $6,000/year cash flow, your cash-on-cash return is 10%.
Is negative cash flow bad?
Negative cash flow means the property costs more to operate than it generates in income. While negative cash flow isn't ideal, some investors accept it if they expect property appreciation, tax benefits, or rent increases to offset the shortfall. However, positive cash flow is generally preferred for sustainable investments.
What operating expenses should I include?
Operating expenses typically include property management, maintenance and repairs, property insurance, property taxes, utilities (if paid by landlord), advertising, legal fees, and other costs necessary to operate the property. Exclude mortgage payments (debt service) and income taxes from operating expenses.
How do I improve cash flow?
To improve cash flow, consider: increasing rent (if market allows), reducing operating expenses, reducing vacancy rates, refinancing to lower interest rate or longer term, making a larger down payment to reduce monthly payment, or finding properties in better markets with higher rent-to-price ratios.