Rental Property Calculator
Analyze rental property investments with cash flow projections, NOI, cap rate, cash-on-cash return, and investment rule screening (1% rule, 50% rule, GRM).
$60,000
5% β Loss: $1,200/yr
π OPERATING EXPENSES
MONTHLY CASH FLOW
$-497/mo
$-5,961/year | β Negative cash flow
INCOME & EXPENSE BREAKDOWN (Annual)
| Gross Rental Income | $24,000 |
| β Vacancy Loss (5%) | ($1,200) |
| Effective Income | $22,800 |
| β Property Tax | ($3,600) |
| β Insurance | ($1,200) |
| β Maintenance (10%) | ($2,400) |
| β Management (10%) | ($2,400) |
| Total Operating Expenses | $9,600 |
| Net Operating Income (NOI) | $13,200 |
| β Mortgage Payment | ($19,161) |
| Net Cash Flow | $-5,961 |
π INVESTMENT METRICS
| Metric | Value | Target | Status |
|---|---|---|---|
| Cap Rate | 4.40% | β₯ 5% | β οΈ Low |
| Cash-on-Cash Return | -9.93% | β₯ 8% | β οΈ Low |
| 1% Rule (Rent/Price) | 0.67% | β₯ 1% | β Fail |
| 50% Rule (OpEx/Income) | 42.1% | β€ 50% | β Pass |
| GRM (Price/Gross Rent) | 12.5x | β€ 15x | β Good |
| Monthly Mortgage | $1,597 | β | β |
π How Rental Property is Calculated
Calculate gross income
$2,000 rent Γ 12 months= Gross: $24,000/yr
Subtract vacancy & expenses
$24,000 β $1,200 vacancy β $9,600 expenses= NOI: $13,200
Subtract mortgage
$13,200 β $1,597/mo Γ 12= Cash flow: -$5,964/yr
Calculate returns
Cap rate = NOI/Price, CoC = CF/Cash invested= Cap: 4.4%, CoC: varies
Rate Comparison
Rental Property
4-10% cap rate
Active income | Leverage | Tax benefits
REITs
4-8% yield
Passive | Liquid | Diversified
House Flipping
10-20% per flip
Active | Short-term | Higher risk
π
The Numbers Don't Lie
Most rental property failures come from not running the numbers properly before purchasing. Always stress-test: What if vacancy is 10% instead of 5%? What if a $10K repair hits in year 1? What if interest rates rise when you refinance? If the deal still works under pessimistic assumptions, it's likely a solid investment.
π‘ What Is Rental Property Investing?
Key Rental Property Metrics
| Metric | Formula | Good Target | What It Tells You |
|---|---|---|---|
| Cap Rate | NOI / Purchase Price | 5-10% | Return before financing |
| Cash-on-Cash | Annual Cash Flow / Cash Invested | 8%+ | Return on your actual cash |
| NOI | Effective Income β Operating Expenses | Positive | Property profitability before mortgage |
| GRM | Price / Gross Annual Rent | β€ 15x | Quick price-to-rent comparison |
Quick Screening Rules
- 1% Rule: Monthly rent β₯ 1% of purchase price. $300K property β needs β₯ $3,000/month rent
- 50% Rule: Operating expenses β 50% of gross income. The other 50% covers mortgage + profit
- 70% Rule (flipping): Purchase price β€ 70% of After-Repair Value (ARV) minus repair costs
- 2% Rule: More aggressive version of 1% rule. Harder to find but excellent cash flow
Operating Expense Breakdown
Typical operating expenses for a rental property run 40-50% of gross rental income:
| Expense | Typical % | Example ($2K/mo rent) |
|---|---|---|
| Property Tax | Varies by location | $3,600/yr |
| Insurance | ~5% | $1,200/yr |
| Maintenance/Repairs | 10% | $2,400/yr |
| Property Management | 8-12% | $2,400/yr |
| Vacancy | 5-10% | $1,200/yr |
| HOA (if applicable) | Varies | $0-$500/mo |
| Total | 40-50% | $10,800+/yr |
Tax Benefits of Rental Property
- Depreciation: Deduct the building value (not land) over 27.5 years. On a $300K property with $240K building value, that's $8,727/year in paper losses β reducing taxable income even if the property appreciates
- Expense deductions: Mortgage interest, property taxes, insurance, repairs, management fees, travel to property, and professional services are all deductible
- 1031 Exchange: Defer capital gains taxes by reinvesting sale proceeds into a like-kind property within 180 days
- Pass-through deduction: Rental income may qualify for the 20% Qualified Business Income (QBI) deduction
Other Real Estate Investment Options
| Rental Property | REITs | House Flipping | Wholesaling | |
|---|---|---|---|---|
| Capital Needed | High ($50K+) | Low ($100+) | Medium ($30K+) | Low ($0-$5K) |
| Time Commitment | Medium-High | None (passive) | High | High |
| Cash Flow | Monthly rent | Quarterly dividends | One-time profit | One-time fee |
| Appreciation | Yes | Yes (share price) | No (sold quickly) | No |
| Tax Benefits | Excellent | Good | Ordinary income | Ordinary income |
| Liquidity | Very low | High | Medium | High |
Example: $300,000 property with 20% down ($60,000). Rent $2,000/mo. Expenses ~$9,600/yr. NOI: $13,200/yr. Mortgage: $11,960/yr. Cash flow: $1,240/yr ($103/mo). Cap rate: 4.4%. Cash-on-cash: 2.1%.