Rental Property Calculator

Cap rate benchmarks vary by market and property type:

Cap Rate = Net Operating Income / Purchase Price

• NOI = Gross rent - Vacancy - Operating expenses (excluding mortgage)
• Cap rate is financing-independent — it measures the property's intrinsic return

Typical ranges:

• 3-5%: Premium markets (SF, NYC, LA) — low cash flow, high appreciation
• 5-7%: Strong markets — balanced cash flow and appreciation
• 7-10%: Midwest/smaller markets — strong cash flow, less appreciation
• 10%+: Higher risk areas or value-add properties

What to target:

• Cash flow focused: 7%+ cap rate
• Balanced approach: 5-7% cap rate
• Appreciation focused: 3-5% cap rate (accept lower cash flow)
• Below 4%: Usually only makes sense if expecting strong appreciation

More than a primary residence — typically 25-30% of purchase price all-in:

On a $300K rental property:

• Down payment (25%): $75,000
• Closing costs (3%): $9,000
• Inspection/appraisal: $1,000
• Initial repairs: $5,000-15,000
• Cash reserves (6 months PITI): $12,000
• Total needed: $102,000-$112,000

Down payment requirements:

• Conventional investment: 25% minimum (some allow 20%)
• FHA house-hack (live in one unit): 3.5% on 2-4 unit
• VA house-hack: 0% down on 2-4 unit
• DSCR loans: 20-25% down, based on property income not your income
• Hard money (for flips): 10-20% + higher interest

Ways to reduce cash needed:

• House hack (live in one unit of a multi-family)
• Seller financing (negotiate terms directly)
• HELOC from primary residence for down payment
• Partner with another investor (split costs and returns)

These overlooked costs turn profitable deals into money losers:

1. Vacancy (5-10% of gross rent)

• Even in hot markets, expect 2-4 weeks vacant per year
• Between tenants: cleaning, repairs, showing, screening
• $2,200 rent x 5% = $110/month set aside

2. Capital expenditures (CapEx)

• Roof replacement: $10K-25K every 20-25 years
• HVAC: $5K-12K every 15-20 years
• Water heater: $1,500-3,000 every 10 years
• Budget $100-200/month for CapEx reserves

3. Property management (8-12% of rent)

• Even if self-managing now, value your time
• Placement fee: 50-100% of first month's rent
• What happens when you have 5 properties?

4. Turnover costs

• Painting: $1,500-3,000
• Cleaning: $200-500
• Minor repairs: $500-2,000
• Lost rent during turnover: $2,200+ per occurrence

5. Legal and admin

• Eviction costs: $1,500-5,000 (attorney + lost rent)
• Accounting/tax prep: $300-800/year
• LLC formation: $100-500
• Landlord insurance premium (higher than homeowners)

It depends on your time, skill, proximity, and number of properties:

Self-manage if:

• You have 1-3 properties
• Properties are within 30 minutes of you
• You're handy and can handle minor repairs
• You're comfortable screening tenants and enforcing leases
• You value the savings (8-12% of rent)

Hire a manager if:

• You have 4+ properties
• Properties are far from where you live
• You value your time at more than $30-50/hour
• You don't want midnight phone calls about plumbing
• You're scaling and need systems

Cost of property management:

• Monthly fee: 8-12% of collected rent
• Placement fee: 50-100% of one month's rent
• Lease renewal: $100-300
• Maintenance markup: 10-20% on repair invoices

On a $2,200/month rental:

• 10% management: $220/month = $2,640/year
• Placement fee: $2,200 per new tenant
• Your time saved: ~10-15 hours/month
• Effective hourly rate of self-managing: $15-22/hour

Cash-on-cash measures the return on the actual dollars you invested:

Formula:

• Cash-on-Cash = Annual Cash Flow / Total Cash Invested
• Annual Cash Flow = (Monthly Cash Flow) x 12
• Total Cash Invested = Down payment + Closing costs + Repairs

Example on $300K property:

• Down payment (25%): $75,000
• Closing costs: $9,000
• Repairs: $5,000
• Total cash invested: $89,000
• Monthly cash flow: $250
• Annual cash flow: $3,000
• Cash-on-cash return: $3,000 / $89,000 = 3.4%

What's a good cash-on-cash return?

• Below 4%: Weak (stock market averages 10%)
• 4-8%: Acceptable if expecting good appreciation
• 8-12%: Good — solid cash flow investment
• 12%+: Excellent — but verify the numbers carefully

Why cash-on-cash can be misleading:

• Doesn't include equity buildup (tenant paying your mortgage)
• Doesn't include appreciation (property value increase)
• Doesn't include tax benefits (depreciation)
• Total ROI is typically 2-3x cash-on-cash when you add these

Rental properties offer significant tax advantages:

1. Depreciation (biggest benefit):

• IRS lets you deduct the building value over 27.5 years
• $300K property, $240K building value: $240K / 27.5 = $8,727/year deduction
• At 24% bracket: $2,094/year tax savings
• You're deducting "wear and tear" even if the property is appreciating

2. Operating expense deductions:

• Mortgage interest: Fully deductible
• Property taxes: Fully deductible
• Insurance: Fully deductible
• Repairs and maintenance: Fully deductible
• Property management: Fully deductible
• Travel to property: Deductible

3. Pass-through deduction (Section 199A):

• May deduct 20% of rental income from taxable income
• Significant savings for landlords in higher brackets

4. 1031 Exchange:

• Sell rental property, buy another, defer all capital gains taxes
• Can chain 1031 exchanges indefinitely
• At death, heirs get stepped-up basis (taxes eliminated)

Example total tax benefit:

• Depreciation: $8,727
• Mortgage interest: $16,000
• Other expenses: $8,000
• Total deductions: $32,727
• At 24% bracket: $7,855 tax savings per year