Analyzing a potential real estate investment requires more than just guessing the monthly rent. To truly understand if a property is a good deal, you must calculate the Net Operating Income (NOI), Cap Rate, and ultimately, the Monthly Cash Flow. This tool helps investors accurately estimate the profitability of a rental property by accounting for mortgages, vacancy rates, and operating expenses.
function calculateRental() {
// Get Inputs
var price = parseFloat(document.getElementById('propPrice').value);
var downPercent = parseFloat(document.getElementById('downPayment').value);
var rate = parseFloat(document.getElementById('intRate').value);
var years = parseFloat(document.getElementById('loanTerm').value);
var rent = parseFloat(document.getElementById('monthlyRent').value);
var vacancy = parseFloat(document.getElementById('vacancyRate').value);
var tax = parseFloat(document.getElementById('propTax').value);
var insurance = parseFloat(document.getElementById('insurance').value);
var maint = parseFloat(document.getElementById('maintenance').value);
var hoa = parseFloat(document.getElementById('hoaFees').value);
// Validation
if (isNaN(price) || isNaN(downPercent) || isNaN(rate) || isNaN(years) || isNaN(rent) || isNaN(vacancy) || isNaN(tax) || isNaN(insurance) || isNaN(maint)) {
document.getElementById('calcError').style.display = 'block';
document.getElementById('resultsArea').style.display = 'none';
return;
} else {
document.getElementById('calcError').style.display = 'none';
}
// Calculations
// 1. Mortgage
var loanAmount = price * (1 – (downPercent / 100));
var monthlyRate = (rate / 100) / 12;
var numPayments = years * 12;
var monthlyMortgage = 0;
if (rate === 0) {
monthlyMortgage = loanAmount / numPayments;
} else {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
}
// 2. Income Adjustments
var vacancyLoss = rent * (vacancy / 100);
var effectiveIncome = rent – vacancyLoss;
// 3. Expenses
var operatingExpenses = tax + insurance + maint + hoa; // Monthly
var totalExpenses = operatingExpenses + monthlyMortgage;
// 4. Cash Flow
var monthlyCashFlow = effectiveIncome – totalExpenses;
// 5. Advanced Metrics
var annualNOI = (effectiveIncome – operatingExpenses) * 12; // NOI excludes debt service
var capRate = (annualNOI / price) * 100;
var totalCashInvested = (price * (downPercent / 100)); // Simplified (usually includes closing costs)
// Prevent division by zero if 0% down
var cashOnCash = 0;
if (totalCashInvested > 0) {
cashOnCash = ((monthlyCashFlow * 12) / totalCashInvested) * 100;
}
// Display Results
document.getElementById('resMortgage').innerText = '$' + monthlyMortgage.toFixed(2);
document.getElementById('resTotalExp').innerText = '$' + totalExpenses.toFixed(2);
document.getElementById('resNOI').innerText = '$' + annualNOI.toFixed(2);
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + '%';
document.getElementById('resCashFlow').innerText = '$' + monthlyCashFlow.toFixed(2);
document.getElementById('resCoC').innerText = cashOnCash.toFixed(2) + '%';
// Styling logic for positive/negative cash flow
var cfRow = document.getElementById('cashFlowRow');
if (monthlyCashFlow >= 0) {
cfRow.className = 'result-row highlight';
} else {
cfRow.className = 'result-row highlight negative';
}
document.getElementById('resultsArea').style.display = 'block';
}
Understanding Real Estate Metrics
Using a calculator is the first step, but understanding the output is crucial for making smart investment decisions.
1. Net Operating Income (NOI)
This is arguably the most important metric in commercial and residential real estate. It represents the annual income the property generates after all operating expenses are paid, but before the mortgage is paid. Formula: (Gross Income – Operating Expenses) = NOI.
2. Cap Rate (Capitalization Rate)
The Cap Rate helps you compare the profitability of different properties regardless of how they are financed (cash vs. loan). It is calculated by dividing the NOI by the purchase price. A higher cap rate generally indicates higher returns but may come with higher risks (e.g., properties in declining neighborhoods often have high cap rates).
3. Cash on Cash Return
This metric tells you how hard your actual invested cash is working. It compares your annual pre-tax cash flow to the total cash you invested (Down Payment + Closing Costs + Rehab Costs). This is often more relevant to individual investors than the Cap Rate because it accounts for leverage (the loan).