Rental Property Analysis Calculator
Investment Analysis Summary
Mastering the Rental Property Analysis
Successful real estate investing isn't about guessing; it's about the numbers. This calculator helps you perform a deep-dive analysis similar to the methods popularized by the BiggerPockets community. To determine if a property is a "deal," you must look beyond the purchase price and evaluate the long-term cash flow potential.
Understanding Key Investment Metrics
1. Monthly Cash Flow: This is the net amount of money left over after all bills are paid. To find this, you subtract your mortgage payment and all operating expenses (taxes, insurance, management, and repairs) from your gross monthly rent. A healthy investment typically targets at least $100-$300 of cash flow per door.
2. Cash on Cash ROI: This metric calculates the yield on the actual cash you invested. It is calculated as (Annual Cash Flow / Total Cash Invested). While Cap Rate looks at the property's performance regardless of debt, Cash on Cash tells you how hard your specific dollars are working for you.
3. The Cap Rate: Short for Capitalization Rate, this represents the natural rate of return for a property if it were purchased entirely in cash. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price. It is primarily used to compare similar properties in the same market.
Example Calculation Breakdown
Imagine a property with a purchase price of 200,000 and a renovation budget of 20,000. You put 20% down (40,000). Your total cash out of pocket is 60,000 (down payment + reno).
- Gross Rent: 2,000
- Operating Expenses (Taxes, Insurance, Mgmt): 700
- Mortgage Payment (at 6.5%): 1,011
- Total Monthly Expenses: 1,711
- Monthly Cash Flow: 289
- Annual Cash Flow: 3,468
- Cash on Cash ROI: 5.78%
Common Pitfalls to Avoid
Many novice investors forget to account for "variable expenses." These include vacancy (when the unit is empty) and capital expenditures (CapEx), such as replacing a roof or a water heater. This calculator includes a Maintenance/Vacancy field to ensure you are setting aside reserves for these inevitable costs. Always be conservative with your estimates to ensure your investment remains profitable even in market fluctuations.