Rental Property Calculator

What this rental calculator measures

This rental property calculator estimates net operating income, cap rate, mortgage payment, annual cash flow, cash-on-cash return, and gross rent multiplier. Enter a purchase price, monthly rent, vacancy allowance, annual operating expenses, down payment, mortgage rate, and term. The result is a screening estimate, not a promise of profit.

Net operating income starts with annual scheduled rent, subtracts vacancy and credit loss, then subtracts operating expenses. Cap rate is NOI divided by purchase price. Mortgage debt is kept separate because cap rate describes the property before financing, while cash flow describes the deal after financing.

Use consistent time periods. Monthly rent becomes annual rent by multiplying by 12. A vacancy input of 5 means 5%, not 0.05%. Expenses should cover owner-paid costs such as taxes, insurance, repairs, utilities, management, and leasing. If a cost is missing, the result will be too optimistic.

Vacancy is not the only income risk. Credit loss, concessions, unpaid balances, and a unit rented below market can reduce collected income. A property with a 5% physical vacancy may still collect less than its scheduled rent if screening or lease enforcement is weak. Model a base case and a cautious case rather than treating one percentage as a guarantee.

Operating expenses also change over time. Insurance premiums can rise after a claim or a regional disaster, property taxes can reset after a sale, and utilities can move with weather. Review at least two years of actual statements when available. A low expense year may be temporary, especially when an owner has postponed repairs.

Save the input assumptions with the result, including the date and source of each estimate. Rent, insurance, taxes, and loan offers change. A dated scenario makes it clear why a later calculation differs and prevents an old estimate from being mistaken for a current quote.

The formulas in plain English

The core formulas are straightforward:

• Effective gross income = monthly rent × 12 × (1 - vacancy rate).
• NOI = effective gross income - annual operating expenses.
• Cap rate = NOI / purchase price.
• Loan amount = price × (1 - down payment rate).
• Monthly payment uses the standard fixed-rate loan formula.
• Cash flow = NOI - annual mortgage payments.
• Cash-on-cash return = annual cash flow / cash invested.
• GRM = purchase price / annual scheduled rent.

NOI excludes principal and interest, depreciation, income tax, and capital improvements. A roof replacement is a real ownership cost, so many investors add a capital reserve even though it is not a normal operating line. State your assumptions when comparing two properties.

For tax treatment, the IRS says residential rental property generally uses straight-line depreciation over a 27.5-year recovery period under MACRS. That tax deduction is not part of NOI. See IRS Publication 527 for the 2024 rules and current instructions.

Cash flow should include the costs needed to acquire and hold the property. Closing costs, lender fees, inspections, initial repairs, permits, and reserves reduce the cash you need before the first rent arrives. They do not all belong in NOI, but they belong in your investment budget. If you compare two deals, use the same treatment for each one.

Run sensitivity checks by changing one input at a time. Try vacancy at 8%, add a management fee, raise insurance, or test a higher mortgage rate. If a small change turns positive cash flow negative, the deal has a narrow margin. That finding is more useful than a single precise-looking return.

Worked example: a $320,000 duplex

Suppose two units rent for $1,450 each, or $2,900 per month. Annual scheduled rent is $34,800. With 5% vacancy, the allowance is $1,740, leaving $33,060 of effective gross income. Annual operating expenses total $12,944.80, so NOI is $20,115.20.

The cap rate is $20,115.20 / $320,000 = 6.29%. If closing costs add 2%, the all-in basis is $326,400 and the cap rate on that basis is about 6.16%. That second number includes a buyer cost that the headline cap rate often leaves out.

Check each expense line. A seller may show taxes and insurance but omit management, turnover, utilities, or a roof reserve. The calculator cannot identify a missing cost, so the quality of the answer depends on the assumptions.

For a small property, verify whether each unit is separately metered and whether the lease assigns utilities correctly. A utility included in rent belongs in the owner expense line; a tenant-paid bill belongs in the gross-rent burden considered by that tenant, not in the owner NOI. Clear lease terms prevent double counting.

How financing changes the result

Assume 25% down on the duplex, a 7.25% fixed mortgage, and a 30-year term. The loan is $240,000 and the monthly payment is about $1,637.22, or $19,646.64 per year. NOI of $20,115.20 leaves about $468.56 in annual cash flow before taxes and unplanned capital costs.

Cash invested is the $80,000 down payment in this example, before closing costs. Annual cash-on-cash return is $468.56 / $80,000 = 0.59%. If you include the $6,400 closing cost, cash invested becomes $86,400 and the return is about 0.54%. The cap rate remains 6.29% because financing does not change the property's NOI.

This gap is the point of looking at both measures. A property can show a decent unlevered yield while leaving little cash after debt service. Loan rate, down payment, term, and amortization all affect cash flow. Principal paydown may build equity, but it is not current cash in your checking account.

Value at a target cap rate

Cap rate can also turn NOI into an implied value: value = NOI / target cap rate. Using $20,115.20 of NOI, a 4% target implies $502,880, a 6% target implies about $335,253, and an 8% target implies $251,440.

The target is not a universal rate. Compare similar properties in the same market, with similar age, tenant quality, lease terms, and condition. A high cap rate can signal deferred maintenance, weak demand, or uncertain income. A low cap rate may reflect stable tenants or expected growth, but it can also mean the buyer is paying too much.

A one-point change matters. The same NOI is worth far less at 8% than at 4%, so small disagreements over expenses can produce large valuation differences.

Cap rate, GRM, and the 1% rule

GRM is price divided by annual scheduled rent. The duplex has a GRM of $320,000 / $34,800 = 9.20. It is fast, but it ignores vacancy and every expense. Two properties with the same GRM can have different taxes, insurance bills, repairs, and management needs.

The 1% rule compares monthly rent with price. Here, $2,900 / $320,000 = 0.91%. It is a rough screening rule, not a valuation method. Expensive markets often fail it while still producing sensible investments, and cheap markets can pass it while hiding serious expenses.

Expense checks that protect the estimate

Start with actual records when possible. Ask for property tax bills, insurance declarations, utility bills, repair invoices, leases, and a rent roll. Compare current rent with market rent, but keep a separate scenario for what the property collected. An advertised rent is not the same as collected rent.

Include a vacancy allowance even when the property has a good history. The Census Bureau's Housing Vacancy Survey publishes national rental vacancy data, but local buildings can differ sharply. Use local evidence for a purchase decision.

Management deserves a line even if you plan to self-manage. That makes the property comparable with an investment that uses a manager and recognizes the value of your time. Add reserves for roofs, HVAC, appliances, paving, and other irregular costs. Keep mortgage costs outside NOI, but include them in cash flow.

Do not treat a calculator result as tax, legal, lending, or investment advice. Fee schedules, rates, and rules change without notice. Confirm important figures with current records and qualified professionals.

Separate property performance from investor performance in your notes. NOI and cap rate describe the building under the chosen rent and expense assumptions. Cash flow and cash-on-cash describe the buyer's financing and cash invested. Two buyers can own the same property and report different cash-on-cash returns because their down payments and loan rates differ.

Also separate operating yield from total return. Appreciation, principal reduction, tax effects, and sale costs can matter, but they are not included in this widget's cap rate. Add them in a separate long-term scenario with explicit assumptions. A one-year operating estimate should not be presented as a prediction of the property's full lifetime return.