Rental Property Calculator

This calculator analyzes a rental property's cash flow and returns so you can quickly assess whether a deal makes financial sense.

1. Enter the purchase price and down payment. Investment properties typically require 20-25% down since they do not qualify for primary-residence loan programs.
2. Set the mortgage rate and term. Investment property rates typically run 0.5-1% higher than primary residence rates.
3. Enter monthly rent based on comparable rentals in the area.
4. Set vacancy rate. A 5% vacancy rate represents about 18 days vacant per year, which is typical for a stable market.
5. Enter monthly expenses including property tax, insurance, and estimated maintenance. A common rule of thumb is 1% of home value per year for maintenance and repairs.
6. Add property management if you plan to hire a manager. Rates typically run 8-12% of collected rent.

Monthly Cash Flow:

Cash Flow = Effective Rent - Mortgage - Operating Expenses - Management

Effective Rent = Gross Rent × (1 - Vacancy Rate)

Cash-on-Cash Return:

CoC Return = Annual Cash Flow / Down Payment

A 6-8% cash-on-cash return is generally considered solid for a rental property. Many markets produce 3-5% in 2024.

Cap Rate (Capitalization Rate):

Cap Rate = Net Operating Income / Purchase Price

NOI = (Effective Rent - Operating Expenses - Management) × 12. The cap rate excludes financing costs and measures the property's yield as if bought with cash.

Gross Rent Multiplier (GRM):

GRM = Purchase Price / Annual Gross Rent

A lower GRM is better. Under 10 is generally favorable in most markets.