Rental Property Calculator
Analyse a rental for cash flow, cap rate, cash-on-cash return and total IRR.
Inputs
Industry average is 5–10%.
Rule of thumb: 1% of property value per year.
Typically 8–12% of collected rent. Set to 0 if self-managing.
HOA, utilities paid by landlord, landscaping, etc.
Used to model the total IRR including sale proceeds.
Expected annual increase in property value.
Typically 5–7% (agent commissions, transfer taxes, etc.).
Annual Cash Flow
-$3,887
After all expenses and mortgage payments.
Monthly Cash Flow
-$324
Cap Rate
5.09%
NOI ÷ Purchase price. Independent of financing.
Cash-on-Cash Return
-5.98%
Annual cash flow ÷ total cash invested.
Total IRR (with sale)
6.40%
Annualized return including cash flow and appreciation over hold period.
Net Operating Income
$15,274
Debt Service Coverage Ratio
0.80
Lenders typically require ≥ 1.25. Below 1.0 = cash flow is negative.
Monthly Mortgage Payment
$1,596.73
Gross Rent Multiplier
11.4
Purchase price ÷ annual gross rent. Lower is better.
Total Cash Invested
$65,000
Step by step
Total cash invested
Down payment $60,000 + Closing $5,000 + Rehab $0
= $65,000
Effective gross income
$26,400 × (1 − 5% vacancy)
= $25,080
Net Operating Income (NOI)
$25,080 − $9,806 expenses
= $15,274
Does NOT include mortgage payments — NOI is property-level, not investor-level.
Annual debt service
= $19,161
Annual cash flow
NOI $15,274 − Debt $19,161
= -$3,887
Cap rate
NOI $15,274 ÷ Purchase price $300,000
= 5.09%
Cash-on-cash return
Annual CF -$3,887 ÷ Cash invested $65,000
= -5.98%
How it works
Rental property analysis starts with Net Operating Income (NOI): gross rent minus vacancy losses and all operating expenses — but before mortgage payments, depreciation, or income taxes. NOI is a property-level metric; the same property has the same NOI regardless of how it's financed. Cap rate (NOI / purchase price) lets you compare properties without financing noise. Cash-on-cash return adds financing back: it measures the annual after-debt cash flow relative to your actual cash outlay. DSCR (NOI / debt service) is the lender's metric — most banks require ≥ 1.25. Total IRR models your full equity return including eventual sale proceeds, giving a single annualized number that captures both income and appreciation.
Formulas
NOI
NOI = Effective Gross Income − Operating Expenses (no debt, no capex)
- EGI
- Effective Gross Income (rent after vacancy)
- OpEx
- Property tax + insurance + maintenance + management
Cap Rate
Cap Rate = NOI / Purchase Price × 100
- P
- Purchase price
Cash-on-Cash
Cash-on-Cash = Annual After-Debt Cash Flow / Total Cash Invested × 100
- ATCF
- After-Tax Cash Flow (NOI − debt service)
DSCR
DSCR = NOI / Annual Mortgage Payments
Frequently Asked Questions
What is a good cap rate?
Cap rates vary enormously by market and property type. In major urban markets, 4–5% cap rates are common for stabilised multifamily. Secondary markets might see 6–8%. Higher cap rates imply more risk or lower growth expectations. A 'good' cap rate depends on your alternatives and risk tolerance, not an absolute number.
Why is NOI different from cash flow?
NOI excludes debt service (mortgage payments), income taxes, and capital expenditures. It measures the property's intrinsic earning power. Cash flow is what actually lands in your bank account after paying the mortgage. Two investors can buy the same property, get identical NOIs, and have vastly different cash flows due to different financing structures.
What is DSCR and why do lenders care?
Debt Service Coverage Ratio = NOI / annual mortgage payment. It measures whether the property generates enough income to cover its loan payments. A DSCR of 1.0 means income exactly covers debt; below 1.0 means you're subsidising the property from other income. Most commercial lenders require DSCR ≥ 1.25, meaning NOI is 25% more than required for debt payments.
What appreciation rate should I use for IRR?
US residential real estate has averaged roughly 3–4% annual appreciation nationally, but this masks huge geographic variation. Use local market data if you have it. The 3% default is roughly in line with long-run inflation. Note that even flat appreciation (0%) can still produce acceptable returns if cash flow is strong.