Rental Property Calculator
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Results
Year-1 cash flow of $63.21 a month, a 6.29% cap rate, 1.01% cash-on-cash return and 10.16% IRR over 10 years.
- Rent collected
- $23,940
- Operating expenses
- $8,212
- Loan payments
- $14,969
- Cash flow
- $758
| Year | Income | Expenses | NOI | Loan payments | Cash flow | Value | Loan balance | Equity |
|---|---|---|---|---|---|---|---|---|
| 1 | $23,940 | $8,212 | $15,728 | $14,969 | $758 | $257,500 | $185,595 | $71,905 |
| 2 | $24,658 | $8,459 | $16,200 | $14,969 | $1,230 | $265,225 | $183,553 | $81,672 |
| 3 | $25,398 | $8,712 | $16,686 | $14,969 | $1,716 | $273,182 | $181,363 | $91,819 |
| 4 | $26,160 | $8,974 | $17,186 | $14,969 | $2,217 | $281,377 | $179,015 | $102,362 |
| 5 | $26,945 | $9,243 | $17,702 | $14,969 | $2,732 | $289,819 | $176,497 | $113,322 |
| 6 | $27,753 | $9,520 | $18,233 | $14,969 | $3,264 | $298,513 | $173,797 | $124,716 |
| 7 | $28,586 | $9,806 | $18,780 | $14,969 | $3,811 | $307,468 | $170,901 | $136,567 |
| 8 | $29,443 | $10,100 | $19,343 | $14,969 | $4,374 | $316,693 | $167,797 | $148,896 |
| 9 | $30,326 | $10,403 | $19,924 | $14,969 | $4,954 | $326,193 | $164,468 | $161,725 |
| 10 | $31,236 | $10,715 | $20,521 | $14,969 | $5,552 | $335,979 | $160,898 | $175,081 |
The debt service coverage ratio is 1.05: NOI covers the loan payments 1.05 times. A ratio close to 1 leaves little margin if rent falls or costs rise.
Figures are before income tax. Depreciation, deductible expenses and tax on the gain when you sell can change the result a lot. Growth rates are assumptions you choose, not predictions.
How to use the rental property calculator
- Enter the purchase price, your down payment, closing costs and any repairs you will pay for before the first tenant moves in.
- Add the loan rate and term. Set the down payment to 100% to model a cash purchase.
- Enter the expected rent, any other income and a vacancy allowance for empty months and unpaid rent.
- Fill in the operating costs: property tax, insurance, HOA dues, maintenance and management (as a share of rent collected) and anything else.
- Choose growth assumptions, how many years you plan to hold the property and the selling costs. The table under the results shows every year.
Rental property formulas
NOI = collected income − operating expenses (not loan payments)
Cap rate = year-1 NOI ÷ purchase price
Cash flow = NOI − loan payments
Cash-on-cash = year-1 cash flow ÷ cash invested
IRR: the rate r where −cash invested + Σ cash flowt ÷ (1 + r)t + net sale ÷ (1 + r)n = 0
Net operating income (NOI) is what the property earns before financing, so it lets you compare properties regardless of how they are paid for. The cap rate divides it by the price. Cash-on-cash return measures what your own money earns in the first year, after the mortgage. The internal rate of return (IRR) adds up every year's cash flow plus what you keep when you sell (sale price minus selling costs and the loan payoff) and finds the single yearly rate that makes them worth exactly what you put in. Cash invested is the down payment plus closing costs and repairs.
Worked example
A $250,000 house is bought with 25% down ($62,500), $7,500 of closing costs and $5,000 of repairs, so the investor puts in $75,000. The $187,500 loan at 7% for 30 years costs $1,247.44 a month.
Rent of $2,100 a month is $25,200 a year; after a 5% vacancy allowance, $23,940 is collected. Tax ($3,000), insurance ($1,500), other costs ($600) and 13% of rent for maintenance and management add up to $8,212, leaving an NOI of $15,728. That is a cap rate of 6.29%.
Loan payments take $14,969 a year, so first-year cash flow is only $758, or $63.21 a month: a cash-on-cash return of 1.01%. If rent, costs and value all grow 3% a year and the property is sold after 10 years for $335,979, the investor keeps $154,922 after selling costs and the loan payoff. With the $30,609 of cash flow along the way, that is a total profit of $110,531 and an IRR of 10.16%.
Bought for cash instead ($262,500 in), the same property would yield $1,310.65 a month, a cash-on-cash return of 5.99% and an IRR of 8.13%. Borrowing raises the IRR here because the property's yield plus the assumed growth beats the 7% loan rate. With no growth, the same loan would pull the IRR down to 0.9%, against 5.17% for cash, and the thin monthly margin leaves little room for a surprise repair.
How the rent changes the returns
The example property with everything else unchanged.
| Monthly rent | Cash flow a month | Cap rate | Cash-on-cash | 10-year IRR |
|---|---|---|---|---|
| $1,800 | −$184.74 | 5.1% | −2.96% | 6.95% |
| $1,950 | −$60.77 | 5.7% | −0.97% | 8.55% |
| $2,100 | $63.21 | 6.29% | 1.01% | 10.16% |
| $2,250 | $187.18 | 6.89% | 2.99% | 11.79% |
| $2,400 | $311.16 | 7.48% | 4.98% | 13.44% |
| $2,600 | $476.46 | 8.27% | 7.62% | 15.67% |
Tips for a realistic analysis
- Use market rent, not hoped-for rent. Check listings for similar homes nearby that have actually rented, not asking prices.
- Don't skip vacancy and maintenance. Even good tenants move out, and roofs, water heaters and appliances wear out. Leaving these at zero makes almost any property look profitable.
- Budget for management even if you self-manage. Your time has a value, and you may not want to be the landlord forever.
- Treat growth rates as assumptions. Rent and values can stall or fall. Try 0% growth to see whether the property still works on cash flow alone.
- Taxes are not included. Rental income is taxable, depreciation and expenses can offset it, and a sale can trigger capital gains tax and depreciation recapture. Ask a tax professional about your situation.
Related calculators
To compare against other investments, use the IRR calculator or the ROI calculator. The mortgage calculator shows the loan in detail, and the real estate calculator looks at a home you live in as an investment, with no rent coming in.
Frequently asked questions
How do I calculate cash flow on a rental property?
Take the rent you expect to collect after vacancy, subtract operating costs (tax, insurance, HOA, maintenance, management, other) to get net operating income, then subtract the loan payments. For a $250,000 home with 25% down at 7%, $2,100 rent and typical costs, NOI is $15,728 and cash flow is $758 a year, or $63.21 a month.
What is a cap rate?
The capitalization rate is net operating income divided by the purchase price. It ignores financing, so it compares properties on their own earnings. $15,728 of NOI on a $250,000 property is a cap rate of 6.29%.
What is the difference between cap rate and cash-on-cash return?
Cap rate uses NOI before loan payments and the full price. Cash-on-cash return uses the cash flow after loan payments and only the cash you put in. In the example, the cap rate is 6.29% but the cash-on-cash return is about 1.01%, because the 7% loan takes most of the NOI.
What does the IRR include?
Every year of cash flow plus the money you keep when you sell, measured against the cash you invested at the start. In the example, holding for 10 years with 3% assumed growth in rent, costs and value gives an IRR of about 10.16%. The growth rates are assumptions; real results can be lower or higher.
Are taxes included in the rental property calculator?
No. Results are before income tax. Rental income is taxable, while depreciation and many expenses can be deducted, and selling can trigger capital gains tax and depreciation recapture. Ask a tax professional how these apply to you.