Calculate IRR, capitalization rate, cash flow, and other financial indicators for rental property investments. Analyze cash-on-cash return, NOI, and long-term profitability.
Rental property investing involves purchasing real estate to generate ongoing rental income while building equity through property appreciation. Success requires careful analysis of cash flow, return metrics, and market conditions to ensure the investment meets your financial goals and risk tolerance.
This calculator provides comprehensive analysis of key rental property metrics including cap rate, cash-on-cash return, IRR, and adherence to common real estate investment rules like the 1% and 50% rules that help investors quickly evaluate opportunities.
Measures property's income-generating potential independent of financing
Shows return on actual cash invested including down payment and closing costs
Accounts for time value of money and varying cash flows over holding period
| Metric | Good Range | Excellent Range | Use Case |
|---|---|---|---|
| Cap Rate | 6-10% | 10%+ | Property comparison, market analysis |
| Cash-on-Cash Return | 8-12% | 15%+ | Leveraged investment analysis |
| IRR | 12-18% | 20%+ | Total return with time value |
| Cash Flow | $200-500/month | $500+/month | Monthly income generation |
| Income Type | Description | Typical Amount |
|---|---|---|
| Base Rent | Primary monthly rental payment | 80-95% of total income |
| Parking Fees | Additional parking spaces | $25-100/month |
| Pet Fees | Pet deposits and monthly fees | $25-75/month |
| Laundry Income | Coin-operated machines | $10-50/month |
| Storage Fees | Additional storage units | $25-100/month |
| Expense Category | Annual Cost Range | Percentage of Rent |
|---|---|---|
| Property Taxes | 0.5-3% of value | 10-25% |
| Insurance | $500-2,000 | 3-8% |
| Property Management | 8-12% of rent | 8-12% |
| Maintenance & Repairs | 1-3% of value | 10-20% |
| Vacancy Allowance | 5-15% of rent | 5-15% |
| Marketing/Leasing | $200-1,000 | 2-5% |
Lower maintenance, easier financing, but higher vacancy risk
More complex management but reduced vacancy impact
Requires more capital and expertise but better income stability
| Loan Type | Down Payment | Interest Rate | Best For |
|---|---|---|---|
| Conventional Investment | 20-25% | Market + 0.5-1% | Most rental properties |
| Portfolio Lender | 20-30% | Varies | Multiple properties |
| Hard Money | 10-30% | 8-15% | Quick closing, rehab projects |
| Seller Financing | Negotiable | Negotiable | Motivated sellers |
Deduct building value (not land) over IRS-specified periods
| Tax Benefit | Description | Limitation |
|---|---|---|
| Operating Expenses | Deduct all business expenses | Must be ordinary and necessary |
| Mortgage Interest | Deduct loan interest payments | No limit for investment property |
| Depreciation | Deduct building value over time | Must recapture on sale |
| 1031 Exchange | Defer capital gains taxes | Must be like-kind property |
Vacancy Risk: Set aside 5-15% of rent for vacancy periods and tenant turnover
Maintenance Risk: Budget 1-3% of property value annually for repairs and maintenance
Market Risk: Property values and rents can decline in economic downturns
Tenant Risk: Screen tenants thoroughly to minimize payment and property damage issues
Interest Rate Risk: Rising rates affect refinancing and property values
Hold and Refinance: Pull out equity while maintaining rental income stream
Sell for Appreciation: Realize capital gains when market conditions are favorable
1031 Exchange: Trade up to larger property while deferring capital gains taxes
Pass to Heirs: Benefit from stepped-up basis and estate planning advantages
Start Local: Begin in markets you know well and can easily manage
Quality over Quantity: Focus on cash-flowing properties in good neighborhoods
Leverage Wisely: Use financing to amplify returns but maintain adequate cash reserves
Diversify Gradually: Spread risk across different property types and locations
Reinvest Profits: Use cash flow and equity to acquire additional properties