How to use the rental property calculator
The calculator has two tabs that share the same inputs. Cash flow (year 1) shows what the property earns in its first year. Long-term return adds growth assumptions and a sale, and gives the total return, annualized ROI and IRR over the years you hold it.
- Financing and purchase. Choose a mortgage or an all-cash purchase, then enter the price, the closing costs and any repairs you pay before the first tenant moves in. For a mortgage, enter the down payment, rate and term.
- Rent and other income. Use market rent from comparable listings, not the seller’s figure. Other income covers parking, laundry or pet fees.
- Vacancy and credit loss, as a percent of gross income: the weeks between tenants plus rent you never collect.
- Property management fee, as a percent of the rent actually collected. Enter 0 if you will manage it yourself.
- Fixed costs: property tax and insurance per year, HOA fees and any utilities you pay per month.
- Maintenance and capital reserve, each as a percent of scheduled rent. The reserve is money set aside for big replacements, not spent in the year.
- On the Long-term return tab, add appreciation, rent growth, expense growth, the holding period and the selling costs.
How cash flow and returns are calculated
Operating expenses = Management + Tax + Insurance + HOA + Utilities + Maintenance + Capex reserve
NOI = EGI − Operating expenses
Cash flow = NOI − Mortgage paymentsManagement is a percent of rent collected; maintenance and capex are percents of scheduled rent. Mortgage payments are principal and interest from the standard amortization formula.
Cash-on-cash return = Annual cash flow ÷ Cash invested
DSCR = NOI ÷ Annual mortgage payments
Break-even occupancy = (Fixed costs + Mortgage) ÷ (Potential income − Management at full occupancy)Cash invested is the down payment plus closing costs and repairs. Fixed costs are everything except the management fee, which falls when rent is not collected.
For the long-term view, rent and the percent-of-rent costs grow at the rent growth rate, the other costs at the expense growth rate, and the value at the appreciation rate. At the end, the property is sold:
Total profit = Σ Cash flow + Cash from sale − Cash invested
Annualized ROI = (1 + Total profit ÷ Cash invested)1/N − 1
IRR: the rate r that makes −Cash invested + Σ CFt ÷ (1 + r)t + Sale ÷ (1 + r)N = 0N is the holding period in years and CFt the cash flow in year t.
A worked example
You buy a single-family rental for $250,000, paying $7,500 in closing costs and $10,000 for repairs, with 25% down on a 7% loan. Cash invested is $80,000.00 and the mortgage payment is $1,247.44 a month.
It rents for $2,200 a month plus $50 of other income. Vacancy of 5% costs $1,350.00 a year and the 8% management fee $2,006.40. After tax, insurance, maintenance and the capex reserve, NOI is $16,603.60, a cap rate of 6.64%.
Subtracting the mortgage leaves $136.19 a month, or $1,634.29 a year: a cash-on-cash return of 2.04%. The DSCR is 1.11× and break-even occupancy 88.4%.
Held for 10 years with 3% appreciation and 3% rent growth, the property produces $40,649 of cumulative cash flow, repays $26,602 of the loan and gains $85,979 in value. After 6% selling costs the sale returns $154,922. Total profit is $115,571, an annualized ROI of 9.35% and an IRR of 10.31%.
Vacancy and break-even occupancy
Vacancy hurts more than its percentage suggests, because almost every cost continues while the unit is empty. Tax, insurance, the reserve and the mortgage are owed either way; only the management fee shrinks. In the example, doubling vacancy from 5% to 10% cuts monthly cash flow from $136.19 to $32.49.
Break-even occupancy turns this into one number. At 88.4%, the property can stand empty for about 6.0 weeks a year before it costs you money. Lenders and experienced investors often want break-even occupancy comfortably below the market’s typical occupancy, so that a bad year does not force you to feed the property from your salary. The chart under the calculator shows monthly cash flow across vacancy rates, with your assumption and the break-even point marked.
Property management: the fee and what it buys
A manager typically charges a percent of rent collected, often 8% to 12% for single-family homes in the US, plus leasing fees when a new tenant moves in. Because the fee is tied to collected rent, it rises with the rent and falls with vacancy.
| Management | Monthly cash flow | Cash-on-cash |
|---|---|---|
| Self-managed (0%) | $303.39 | 4.55% |
| 8% of collected rent | $136.19 | 2.04% |
| 10% of collected rent | $94.39 | 1.42% |
Self-management more than doubles the example’s cash flow, but the difference is a wage for your time: tenant screening, rent collection, repairs at awkward hours and legal notices. If you plan to self-manage, run the numbers with a fee anyway. A deal that only works without management depends on your continued free labor, and becomes harder to hand over or sell.
Cash-on-cash, cap rate or IRR
Each measure answers a different question:
- Cap rate ignores financing. It compares properties on their own income, so it is the right tool for judging price.
- Cash-on-cash return measures this year’s cash against the cash you put in. It reflects your loan, but ignores appreciation, loan paydown and the sale.
- IRR covers the whole holding period, including the sale, and weights each dollar by when it arrives.
Leverage moves them in different directions. Buying the example for cash raises year-1 cash flow to $1,383.63 a month, but the cash-on-cash return is 6.21% on $267,500.00 invested, and the IRR over 10 years falls to 8.21% against 10.31% with the mortgage. Borrowing raises the return only when the property earns more than the loan costs. At 7%, the example’s unleveraged yield of 6.21% is below the loan rate, so the mortgage lowers the year-1 return; leverage pays off here only through growth in rent and value.
What drives the long-term return
| Scenario | Total profit | IRR |
|---|---|---|
| The example (3% appreciation, 10 years) | $115,571 | 10.31% |
| No appreciation | $34,750 | 4.23% |
| 5% appreciation | $182,541 | 13.68% |
| Sold after 5 years | $29,237 | 6.72% |
Appreciation is the largest and least certain part of the return: without it, the example’s IRR drops to 4.23%. A short hold also suffers, because closing costs, repairs and selling costs are spread over fewer years. Treat appreciation as a scenario to test rather than a number to rely on.
What this calculator does not include
- Income tax. Rental income is taxable, but depreciation and mortgage interest usually offset much of it in the early years, and depreciation is partly recaptured when you sell. Results are before tax.
- Mortgage insurance, points and refinancing. The loan is a fixed-rate loan with no extra costs beyond the closing costs you enter.
- Value added by repairs. Appreciation is applied to the purchase price; if the repairs raise the value, the projection understates it.
- Lumpy costs. Real maintenance and capital costs arrive unevenly. The reserve smooths them into a steady percentage, which is right for planning but not for any single year.
- Leasing fees, legal costs and evictions, which add to vacancy in a bad year.