Calculator Panel
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Enter your values above and click Calculate.
What This Calculator Does
This calculator performs a comprehensive financial analysis of a rental property acquisition, evaluating NOI, capitalization rates, cash flow, and debt service coverage.
How to Use This Calculator
Enter the purchase price, down payment percentage, mortgage interest rate, loan term, gross monthly rent, and expected operating expense percentage, then click Calculate.
How the Calculation Works
The underlying math engine processes your inputs using exact formulas. This systematic approach ensures professional, institutional-grade calculation precision:
Mathematical Formula
Formula Legend:
- · Gross Income = Monthly rent multiplied by 12.
- · Operating Expenses = Property tax, insurance, management, maintenance (excluding mortgage principal & interest).
- · Cash Invested = Down payment plus closing costs and immediate repairs.
Practical Example
Suppose you buy a rental property for $350,000, put 20% down ($70,000), pay $10,000 in closing costs/rehab (total cash invested = $80,000), get a 6.5% interest rate, and expect $2,800/month rent and 35% operating expenses:
Step-by-Step Mathematical Walkthrough:
- 1 Calculate Gross Annual Rent: $2,800 * 12 = $33,600.
- 2 Calculate annual Operating Expenses (35%): $33,600 * 0.35 = $11,760. Net Operating Income (NOI) = $33,600 - $11,760 = $21,840.
- 3 Calculate Cap Rate: ($21,840 / $350,000) * 100 = 6.24%.
- 4 Calculate monthly mortgage payment: $280,000 loan at 6.5% for 30 years = $1,770 monthly ($21,240 annually).
- 5 Calculate Net Cash Flow: NOI - Mortgage = $21,840 - $21,240 = $600/year ($50/month).
- 6 Calculate Cash-on-Cash Return: ($600 / $80,000) * 100 = 0.75%.
Important Assumptions & Notes
- Operating expenses include property taxes, property insurance, repairs, property management, and vacancy allowances.
- Closing costs and initial rehab expenses are estimated at 3% of the purchase price.
Common Mistakes or Considerations
- Underestimating operating expenses, which typically range between 35% and 45% of rental income once capex and property management are factored in.
- Focusing exclusively on Cap Rate while ignoring the cost of leverage (mortgage interest rate).
Frequently Asked Questions
What is the difference between Cap Rate and Cash-on-Cash Return?
Cap Rate evaluates the property's yield as if it were purchased entirely in cash, ignoring any mortgage debt. Cash-on-Cash Return measures the actual return on the specific cash you invested, taking into account your mortgage payment.
What is Net Operating Income (NOI)?
NOI is the total income generated by the property minus all reasonable operating expenses. Crucially, NOI does not include mortgage principal and interest payments, capital expenditures, or income taxes.