How accurate is the rental property calculator?
Our calculator provides professional-grade estimates based on standard real estate investment formulas used by investors and financial analysts. Results are for educational purposes and should be verified with actual market data and consultation with financial professionals before making investment decisions.
What is a good cash-on-cash return?
A cash-on-cash return of 8-12% is generally considered good for rental properties. Returns above 12% are excellent, while below 5% may not justify the investment risk. However, acceptable returns vary by market, property type, and your individual investment goals.
What is cap rate and why does it matter?
Cap rate (capitalization rate) measures the annual return on a property based on its current value. It's calculated as Net Operating Income divided by Property Value. Cap rate helps you compare different properties regardless of financing structure and indicates the potential return on investment.
Should I include property appreciation in my analysis?
While appreciation is important for long-term returns, it's best to analyze cash flow separately. Focus on properties that generate positive cash flow even without appreciation, as market conditions can change unexpectedly. Think of appreciation as a bonus, not a requirement.
What expenses should I include in my calculation?
Include mortgage payments (principal and interest), property taxes, insurance, HOA fees, property management fees (8-10% of rent), maintenance and repairs (1-2% of property value annually), vacancy allowance (5-10% of potential rent), and capital expenditures for major repairs and replacements like roof, HVAC, and appliances.
How do I calculate monthly cash flow for a rental property?
Monthly cash flow equals total monthly income (rent plus any other income) minus all monthly expenses (mortgage, taxes, insurance, HOA, property management, maintenance, and vacancy allowance). Positive cash flow means the property generates more income than expenses each month, which is crucial for successful real estate investing.
What is the 1% rule in real estate investing?
The 1% rule is a quick screening tool that suggests a property should generate monthly rent equal to at least 1% of its purchase price. For example, a $200,000 property should rent for at least $2,000 per month. While not a definitive measure, it helps quickly identify properties worth deeper analysis.
Can I use this calculator for multi-family properties?
Yes! This calculator works for single-family homes, duplexes, triplexes, fourplexes, and small multi-family properties. For properties with multiple units, add up the total monthly rent from all units and use the combined figure in your calculation.