Rental Property Investment Calculator
Acquisition Costs
Income & Fixed Costs
Variable Expenses (Percent of Rent)
Total Initial Investment: $0
Understanding Rental Property Investment Metrics
Before purchasing a real estate asset, it is critical to analyze the financial viability of the deal. Unlike primary residences, investment properties are businesses where the goal is consistent yield and capital appreciation. This calculator helps you determine four primary metrics used by professional real estate investors.
1. Net Operating Income (NOI)
NOI is the total income generated by the property after all operating expenses have been paid, but before any debt service (mortgage payments) or taxes. It represents the efficiency of the asset itself. To calculate NOI, we take the gross annual rent and subtract vacancy, maintenance, management fees, taxes, and insurance.
2. Cap Rate (Capitalization Rate)
Cap Rate is a measure of the property's natural rate of return for a single year without considering financing. It is calculated by dividing the NOI by the purchase price. In most markets, a "good" cap rate ranges from 4% to 8%, depending on the risk and location (Asset Class A, B, or C).
3. Cash-on-Cash Return (CoC)
This is arguably the most important metric for investors. It measures the annual pre-tax cash flow relative to the actual amount of cash you "out-of-pocketed" to acquire the property. In this calculator, the Cash-on-Cash return considers your Purchase Price, Closing Costs, and Rehab Budget as the total basis.
Real-World Example
Imagine you buy a duplex for $250,000. You spend $5,000 on closing and $10,000 on new flooring and paint (Total Investment: $265,000). If it rents for $2,000/month:
- Annual Gross Income: $24,000
- Operating Expenses (35% rule): ~$8,400 (including taxes, insurance, and maintenance)
- NOI: $15,600
- Cap Rate: 6.24% ($15,600 / $250,000)
- Cash-on-Cash: 5.88% ($15,600 / $265,000)
By using this rental property investment calculator, you can adjust your vacancy expectations or rehab budgets to see how they impact your final bottom line before you sign a contract.