Rental Property Calculator

Rental property investment can generate passive income and long-term wealth through cash flow and property appreciation. Understanding key metrics is essential for evaluating opportunities.

Key Investment Metrics

• Cash-on-Cash Return: Annual cash flow ÷ Total cash invested. Target: 8-12%
• Cap Rate: NOI ÷ Property value. Higher cap rate = higher return potential
• Gross Yield: Annual rent ÷ Purchase price. Quick initial screening metric
• Cash Flow: Rental income minus all expenses. Must be positive for sustainability

The 1% Rule

• Monthly rent should be at least 1% of purchase price
• Example: $200,000 property should rent for $2,000/month
• Rule provides quick screening for potential investments
• Market conditions may make this challenging in high-cost areas

Operating Expenses

• Property Tax: 1-2% of property value annually
• Insurance: $800-$2,000 annually depending on location
• Maintenance: Budget 1% of property value annually
• Property Management: 8-10% of monthly rent if hiring manager
• Vacancy: Account for 5-10% vacancy rate
• CapEx Reserve: Major repairs (roof, HVAC, appliances)

Financing Strategies

• Conventional Loan: 15-25% down, best rates for investment properties
• FHA Loan: 3.5% down for owner-occupied multi-family (2-4 units)
• House Hacking: Live in one unit, rent others to offset mortgage
• Cash Purchase: No financing costs, but ties up capital

Risk Factors

• Vacancy: Extended periods without tenants reduce cash flow
• Market Decline: Property values can decrease
• Unexpected Repairs: Major systems can fail requiring large expenses
• Problem Tenants: Evictions are costly and time-consuming
• Interest Rate Risk: Variable rate loans can increase payments