Mortgage Rate Calculation Formula

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Rental Property Profitability Calculator

Purchase Information
Financing Details
Income & Expenses
Please ensure all values are valid numbers.

Investment Analysis

Net Operating Income (NOI) (Annual): $0.00
Total Initial Cash Invested: $0.00
Monthly Mortgage Payment: $0.00
Monthly Cash Flow: $0.00
Cap Rate: 0.00%
Cash on Cash Return: 0.00%
function calculateRentalYield() { // 1. Get Input Values var propPrice = parseFloat(document.getElementById('propPrice').value); var downPayPerc = parseFloat(document.getElementById('downPayPerc').value); var closingCosts = parseFloat(document.getElementById('closingCosts').value); var intRate = parseFloat(document.getElementById('intRate').value); var loanTerm = parseFloat(document.getElementById('loanTerm').value); var rentIncome = parseFloat(document.getElementById('rentIncome').value); var vacRate = parseFloat(document.getElementById('vacRate').value); var propTax = parseFloat(document.getElementById('propTax').value); var propIns = parseFloat(document.getElementById('propIns').value); var maintCost = parseFloat(document.getElementById('maintCost').value); var hoaFees = parseFloat(document.getElementById('hoaFees').value); var errorMsg = document.getElementById('errorMsg'); var resultsSection = document.getElementById('resultsSection'); // Validation if (isNaN(propPrice) || isNaN(downPayPerc) || isNaN(intRate) || isNaN(loanTerm) || isNaN(rentIncome)) { errorMsg.style.display = 'block'; resultsSection.style.display = 'none'; return; } else { errorMsg.style.display = 'none'; } // 2. Financial Calculations // Mortgage Calculation var downPayment = propPrice * (downPayPerc / 100); var loanPrincipal = propPrice – downPayment; var monthlyRate = (intRate / 100) / 12; var totalPayments = loanTerm * 12; var monthlyMortgage = 0; if (intRate > 0) { monthlyMortgage = loanPrincipal * (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)) / (Math.pow(1 + monthlyRate, totalPayments) – 1); } else { monthlyMortgage = loanPrincipal / totalPayments; } // Income Calculations var grossAnnualRent = rentIncome * 12; var vacancyLoss = grossAnnualRent * (vacRate / 100); var effectiveGrossIncome = grossAnnualRent – vacancyLoss; // Expense Calculations var annualMaintenance = grossAnnualRent * (maintCost / 100); var annualHOA = hoaFees * 12; var totalOperatingExpenses = propTax + propIns + annualMaintenance + annualHOA; // Net Operating Income (NOI) var noi = effectiveGrossIncome – totalOperatingExpenses; // Cash Flow var annualDebtService = monthlyMortgage * 12; var annualCashFlow = noi – annualDebtService; var monthlyCashFlow = annualCashFlow / 12; // ROI Metrics var totalCashInvested = downPayment + closingCosts; var capRate = 0; if (propPrice > 0) { capRate = (noi / propPrice) * 100; } var cashOnCash = 0; if (totalCashInvested > 0) { cashOnCash = (annualCashFlow / totalCashInvested) * 100; } // 3. Display Results document.getElementById('resNOI').innerText = "$" + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resCashInvested').innerText = "$" + totalCashInvested.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('resMortgage').innerText = "$" + monthlyMortgage.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); var resCashFlowEl = document.getElementById('resCashFlow'); resCashFlowEl.innerText = "$" + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); resCashFlowEl.style.color = monthlyCashFlow >= 0 ? '#38a169' : '#e53e3e'; document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%"; var resCoCEl = document.getElementById('resCoC'); resCoCEl.innerText = cashOnCash.toFixed(2) + "%"; resCoCEl.style.color = cashOnCash >= 0 ? '#38a169' : '#e53e3e'; resultsSection.style.display = 'block'; }

How to Analyze Rental Property Profitability

Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property and renting it out does not guarantee a profit. To succeed, investors must meticulously analyze the numbers. Our Rental Property Profitability Calculator helps you determine the viability of a potential investment by calculating key metrics like Cash Flow, Cap Rate, and Cash on Cash Return.

Understanding Key Investment Metrics

1. Net Operating Income (NOI)

NOI is the foundation of real estate valuation. It represents the total income the property generates after all operating expenses are paid, but before paying the mortgage (debt service).

Formula: NOI = (Rental Income - Vacancy Losses) - (Taxes + Insurance + Maintenance + HOA)

2. Capitalization Rate (Cap Rate)

The Cap Rate measures the natural rate of return of the property assuming you paid for it continuously in cash. It is excellent for comparing different properties regardless of how they are financed.

  • Formula: Cap Rate = (NOI / Purchase Price) × 100
  • Good Target: Generally, a Cap Rate between 5% and 10% is considered healthy, though this varies significantly by location.

3. Cash on Cash Return (CoC)

This is arguably the most important metric for leveraged investors. It measures the cash income earned on the cash invested. Unlike Cap Rate, CoC takes your mortgage payments and down payment size into account.

  • Formula: CoC = (Annual Cash Flow / Total Cash Invested) × 100
  • Total Cash Invested includes your down payment and closing costs.

Example Calculation

Let's say you are looking at a single-family home priced at $250,000. Here is how the numbers might look:

  • Down Payment: 20% ($50,000)
  • Monthly Rent: $2,200
  • Operating Expenses: Property Tax ($3,000/yr), Insurance ($1,200/yr), Maintenance (5%).

After factoring in a vacancy rate of 5%, your Effective Gross Income would be roughly $25,080 annually. Subtracting operating expenses gives you an NOI. If you take out a mortgage at 6.5%, your debt service will reduce that NOI to your final Cash Flow. If your Cash on Cash return is above 8-10%, it is likely a strong investment opportunity compared to the stock market.

Why Factor in Vacancy and Maintenance?

Novice investors often make the mistake of assuming 100% occupancy and zero repairs. This calculator includes inputs for Vacancy Rate (typically 5-8%) and Maintenance Cost (typically 5-10% of rent) to give you a realistic view of your potential returns. Ignoring these can turn a profitable-looking deal into a financial drain.

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