| Monthly Mortgage (P&I): | $'+monthlyMortgage.toFixed(2)+' |
| Total Monthly Expenses: | $'+totalMonthlyOut.toFixed(2)+' |
| Monthly Cash Flow: | $'+monthlyCashFlow.toFixed(2)+' |
| Annual Cash Flow: | $'+annualCashFlow.toFixed(2)+' |
| Cap Rate: | '+capRate.toFixed(2)+'% |
| Cash on Cash ROI: | '+cocROI.toFixed(2)+'% |
Initial Investment: $'+dpAmount.toFixed(2)+'
Loan Amount: $'+loanAmount.toFixed(2)+'
Net Operating Income (Annual): $'+((rent-expenses)*12).toFixed(2)+'
Using the Rental Property Calculator
A rental property calculator is an essential tool for real estate investors looking to quantify the potential profitability of a residential or commercial investment. By entering a few key metrics regarding the purchase price, financing, and expected income, you can quickly determine if a property will generate positive cash flow or if it represents a risky investment.
Whether you are a seasoned landlord or buying your first "house hack," this tool helps you compare different properties side-by-side using standardized metrics like Cap Rate and Cash on Cash Return.
- Purchase Price
- The total agreed-upon price of the property before closing costs.
- Down Payment (%)
- The percentage of the purchase price you are paying upfront. Most investment loans require 20% to 25%.
- Interest Rate
- The annual interest rate for your mortgage loan.
- Monthly Rent
- The total gross monthly income you expect to collect from tenants.
- Other Monthly Expenses
- Includes property taxes, insurance, HOA fees, maintenance reserves, and property management fees.
How the Calculations Work
To find the ROI of a rental property, the calculator follows a specific mathematical path to determine your "take-home" pay after all obligations are met. The two most important formulas are:
1. Capitalization Rate (Cap Rate)
The Cap Rate measures the property's natural rate of return without considering financing. It is calculated by taking the Net Operating Income (NOI) and dividing it by the purchase price.
Cap Rate = (Annual Gross Rent – Annual Operating Expenses) / Purchase Price
2. Cash on Cash ROI
This is the "investor's favorite" metric because it measures the return on the actual cash you came out of pocket with. It includes the impact of your mortgage payment.
CoC ROI = (Annual Cash Flow / Total Cash Invested) * 100
Rental Calculation Example
Scenario: You are looking at a duplex priced at $300,000. You plan to put 25% down ($75,000) with a 7% interest rate for 30 years. The total rent is $3,000/month, and expenses (taxes, insurance, repairs) average $800/month.
Step-by-step solution:
- Loan Amount: $300,000 – $75,000 = $225,000
- Monthly Mortgage: Using the formula, the P&I payment is ~$1,496.93
- Total Outgoings: $1,496.93 (Mortgage) + $800 (Expenses) = $2,296.93
- Monthly Cash Flow: $3,000 – $2,296.93 = $703.07
- Annual Cash Flow: $703.07 x 12 = $8,436.84
- Cash on Cash ROI: ($8,436.84 / $75,000) * 100 = 11.25%
Common Questions
What is a good ROI for a rental property?
Most real estate investors aim for a Cash on Cash ROI of 8% to 12%. However, this varies by market. In high-growth areas, investors might accept 5% ROI if they expect the property value to double over ten years (appreciation).
Should I include vacancy in my expenses?
Yes. Professional investors always include a "Vacancy Allowance" (usually 5-10% of gross rent) in their rental property calculator inputs to account for the months when the unit is empty between tenants.
What is the 1% Rule?
The 1% rule is a quick thumb-rule stating that a property should rent for at least 1% of its purchase price. For a $200,000 house, the rent should be $2,000. While harder to find in today's market, it remains a benchmark for strong cash flow.