What is a rental property calculator?
A Rental Property Calculator estimates whether a rental home is likely to be a good investment. It combines the purchase price, financing, operating costs, rent, vacancy and an expected sale price to estimate yearly cash flow, cap rate, cash-on-cash return and the overall return when you sell. It is useful for first-time landlords and experienced investors comparing properties.
How to use it
- Purchase: enter the price, whether you use a loan (down payment, rate and term), closing costs and any repair costs.
- Recurring operating expenses: enter property tax, insurance, HOA, maintenance and other costs, each with an expected yearly increase.
- Income: enter monthly rent, other income, the vacancy rate and any management fee.
- Sell: enter a sale price or an appreciation rate, how many years you will hold the property and the cost to sell.
- Click Calculate.
Rental property formulas
Net operating income (NOI) = Yearly rent − Vacancy − Operating costs (property tax, insurance, HOA, maintenance and management, but not the mortgage)
Cap rate = NOI ÷ Purchase price
Cash-on-cash return = Yearly cash flow after the mortgage ÷ Cash invested (down payment, closing costs and repairs)
Example
You buy a property for $250,000 and rent it for $1,800 a month, or $21,600 a year. If vacancy and operating costs together take 35% of the rent:
- NOI = $21,600 × 65% = $14,040
- Cap rate = $14,040 ÷ $250,000 ≈ 5.6%
If you paid cash, that 5.6% is roughly your yearly return before appreciation. With a mortgage, subtract the yearly loan payments from the NOI to find your cash flow, then divide by the cash you put in to get the cash-on-cash return.
How to judge a rental property
- Positive cash flow: rent should cover the mortgage and all operating costs with money left over.
- Cap rate: compare it with similar properties in the same area; a much higher figure can signal higher risk.
- Cash-on-cash return: compare it with what the same cash could earn elsewhere.
- Realistic costs: include vacancy, repairs and management even if you plan to manage the property yourself.
Tips
- Check local rents for similar homes rather than relying on the seller’s figure.
- Budget for vacancy (often a few weeks a year) and for bigger repairs such as a roof or HVAC system.
- Get insurance and property tax quotes before you buy.
- Test a lower rent and a higher interest rate to see how much room for error the deal has.
Frequently Asked Questions
A Rental Property Calculator is an online tool that estimates the financial performance of a rental property. It calculates expected income, expenses, cash flow, and return on investment to help investors make informed decisions.
Divide your yearly profit by the total cash you invested. For a cash purchase, NOI ÷ total cost is a good starting point; with a loan, use yearly cash flow after mortgage payments ÷ down payment, closing costs and repairs.
You should include mortgage payments, property taxes, insurance, maintenance, repairs, vacancy costs, and any management fees. Including all expenses gives you a more realistic estimate of your property’s profitability.
Cap rate is net operating income divided by the purchase price. A $250,000 property with $14,040 of NOI has a cap rate of about 5.6%. It ignores financing, so it lets you compare properties on equal terms.
Yes. The calculator is designed for both beginners and experienced investors. Simply enter your property details, and the tool will generate easy-to-understand financial estimates.
Disclaimer: This calculator gives estimates for general information only. It is not financial, tax or legal advice. Results depend on the numbers you enter and on simplified assumptions, so your actual figures may differ. Check important decisions with a qualified professional or the official source.
Related Calculators
To dig deeper into the financing and returns, try these calculators.