Rental Property Calculator

This calculator analyzes a buy-and-hold rental property. From the price, the rent and the expected costs it works out net operating income (NOI), monthly cash flow after the mortgage, and the measures investors use to compare deals: cap rate, cash-on-cash return, debt service coverage ratio (DSCR), gross rent multiplier, the 1% rule and break-even occupancy. It then projects the property over your holding period, with rent, costs and value growing each year, and gives the total profit and internal rate of return (IRR) after selling.

The chart splits a year's potential rent into vacancy, operating costs, the mortgage and what is left for you. To judge a listing quickly, start with the price and rent, then replace the default percentages with figures from local property managers and insurance quotes. Small changes in rent, vacancy or the interest rate can turn a positive cash flow negative, so try a pessimistic case as well as the expected one before you make an offer.

NOI = rent collected − operating expenses (not the mortgage)

Cap rate = NOI ÷ purchase price

Cash-on-cash = (NOI − mortgage payments) ÷ cash invested

DSCR = NOI ÷ annual mortgage payments

Cap rate describes the property on its own, as if bought with cash, so it compares buildings regardless of financing. Cash-on-cash shows the return on the money you actually put in, including the effect of the loan. IRR adds the sale at the end and the timing of every cash flow, which makes it the best single measure of a whole holding period.

A $250,000 house renting for $2,100 a month, bought with 25% down at 7%: after 5% vacancy, 8% management, 10% of rent for maintenance and reserves, $3,000 of tax and $1,400 of insurance, NOI is $15,105 and the cap rate 6.04%. The mortgage takes $14,969 a year, leaving $135 of cash flow, a cash-on-cash return of 0.19% on $70,000 invested. With 3% yearly growth and a sale after ten years, the IRR is 10.28%.

Bought with cash, the same house has no mortgage, so cash flow equals NOI, $15,105 a year, a 5.92% cash-on-cash return.

At $1,800 rent with the loan, cash flow is −$2,651 a year and the DSCR 0.82, showing how sensitive a leveraged rental is to the rent.

• The 1% rule asks for monthly rent of at least 1% of the price. It is a quick screen, rarely met in expensive markets, and says nothing about costs.
• The 50% rule assumes operating costs take about half of the rent. Real ratios vary widely; this calculator uses your own cost inputs instead.
• DSCR of 1.2 to 1.25 or more is a common lender requirement for investment property loans. Below 1.0, the rent does not cover the mortgage.

Vacancy between tenants, turnover cleaning and repairs, and capital replacements such as a roof or water heater are easy to leave out but certain to arrive. Budget for them as a share of rent even in years when nothing breaks. Insurance on a rental costs more than on a home you live in, and property tax can rise after purchase when the home is reassessed. Rental income is taxable, but depreciation and expenses offset much of it; this calculator shows returns before income tax.