Determine the optimal monthly rent to achieve your target ROI.
(Taxes, Insurance, Maintenance)
Please enter valid positive numbers for all fields.
Required Monthly Rent:–
Required Annual Gross Income:–
Target Net Operating Income (NOI):–
Effective Occupancy Cost Adjustment:–
How to Calculate Rental Rates for Profitability
Determining the correct rental rate is the most critical decision for any landlord or property investor. Charging too little results in negative cash flow, while charging too much leads to high vacancy rates. This Rental Rate Calculator uses a "bottom-up" approach, calculating the rent needed to cover your operating costs and achieve a specific target Return on Investment (ROI) or Cap Rate.
The Rental Rate Formula
To calculate the required rent based on financial goals, we use the following logic:
Determine Target NOI: Multiply the asset value by your desired ROI percentage. This is your Net Operating Income goal.
Add Operating Expenses: Add your annual taxes, insurance, and maintenance costs to the Target NOI. This gives the Total Revenue Needed.
Adjust for Vacancy: Since a property is rarely occupied 100% of the time, you must divide the Total Revenue Needed by the occupancy rate (100% – Vacancy Rate).
Monthly Calculation: Divide the final annual figure by 12 to get the required monthly rent.
Key Input Definitions
Property/Asset Value: The current market value of the property or the total purchase price + renovation costs.
Annual Operating Expenses: All recurring costs excluding mortgage principal/interest. This includes property taxes, landlord insurance, repairs, property management fees, and HOA dues.
Target Annual ROI: The percentage return you expect on the asset's total value (also known as the Capitalization Rate or Cap Rate). A common target for residential real estate is between 5% and 10%, though this varies by market.
Vacancy Rate: The percentage of time you expect the unit to sit empty between tenants. A standard conservative estimate is 5% to 8% (approx. 2-4 weeks per year).
Why Vacancy Rate Matters
Many landlords make the mistake of calculating rent based on 100% occupancy. If you need $20,000 a year to cover costs and profit, but your property is empty for one month (8.3% vacancy), you will fall short of your goal. By adjusting the rental rate upward to account for vacancy, you ensure your actual annual income hits your target even if the property is empty for the estimated period.
function calculateRentalRate() {
// 1. Get DOM elements
var assetInput = document.getElementById('rrcAssetValue');
var expenseInput = document.getElementById('rrcAnnualExp');
var roiInput = document.getElementById('rrcTargetROI');
var vacancyInput = document.getElementById('rrcVacancy');
var errorDiv = document.getElementById('rrcError');
var resultsDiv = document.getElementById('rrcResults');
// 2. Parse values
var assetValue = parseFloat(assetInput.value);
var annualExp = parseFloat(expenseInput.value);
var targetROI = parseFloat(roiInput.value);
var vacancyRate = parseFloat(vacancyInput.value);
// 3. Validation
if (isNaN(assetValue) || isNaN(annualExp) || isNaN(targetROI) || isNaN(vacancyRate)) {
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
if (assetValue < 0 || annualExp < 0 || targetROI < 0 || vacancyRate = 100) {
errorDiv.innerText = "Please verify inputs. Vacancy cannot be 100% or more.";
errorDiv.style.display = 'block';
resultsDiv.style.display = 'none';
return;
}
errorDiv.style.display = 'none';
// 4. Calculation Logic
// Step A: Calculate Target Net Operating Income (NOI)
// NOI = Value * (ROI / 100)
var targetNOI = assetValue * (targetROI / 100);
// Step B: Calculate Total Revenue Required before Vacancy
// Revenue = Target NOI + Operating Expenses
var totalRevenueNeeded = targetNOI + annualExp;
// Step C: Adjust for Vacancy to get Gross Scheduled Income (GSI)
// GSI = Revenue / (1 – VacancyRate/100)
// Example: If 10% vacancy, we divide by 0.9.
var occupancyRate = 1 – (vacancyRate / 100);
var requiredAnnualGross = totalRevenueNeeded / occupancyRate;
// Step D: Monthly Rent
var monthlyRent = requiredAnnualGross / 12;
// Step E: Vacancy Cost (The dollar amount "lost" to vacancy that we padded for)
var vacancyCost = requiredAnnualGross – totalRevenueNeeded;
// 5. Display Results
document.getElementById('resMonthlyRent').innerText = "$" + monthlyRent.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resAnnualGross').innerText = "$" + requiredAnnualGross.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTargetNOI').innerText = "$" + targetNOI.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resVacancyAdj').innerText = "$" + vacancyCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results container
resultsDiv.style.display = 'block';
}