About Rental Property Calculator

How It Works

This calculator helps real estate investors evaluate the profitability of a potential rental property. By inputting purchase costs, financing details, expected rental income, and operating expenses, it calculates four key real estate investment metrics: Net Operating Income (NOI), Capitalization Rate (Cap Rate), Cash-on-Cash Return (CoC), and Cash Flow.

Key Formulas

Here are the main formulas used to evaluate rental property investment value:

Net Operating Income (NOI) = Total Annual Rental Income - Total Annual Operating Expenses

Cap Rate = (Net Operating Income / Property Purchase Price) * 100%

Cash-on-Cash Return = (Annual Net Cash Flow / Total Initial Cash Invested) * 100%

Annual Net Cash Flow = Net Operating Income - Total Annual Mortgage Payments (Principal + Interest)

Terminology

Net Operating Income (NOI): The income generated by the property after deducting all operating expenses (taxes, insurance, maintenance, management) but before deducting mortgage payments.
Capitalization Rate (Cap Rate): Measures the rate of return on the property itself, independent of financing. Used to compare the profitability of different properties.
Cash-on-Cash Return (CoC): Measures the annual return on the actual cash you invested. This is often the most important metric for investors using leverage (loans).