Estimate IRR, Cap Rate, Cash Flow, and other financial indicators of a rental property.
Rental property investment involves purchasing real estate and holding, leasing, or selling it for profit. Unlike passive investments, rental properties require active management—finding tenants, handling maintenance, and managing finances. However, they offer unique benefits: regular cash flow, tax advantages, and a hedge against inflation.
Our calculator estimates the financial performance of a rental property over your intended holding period. It computes key metrics used by professional investors:
1% Rule: Monthly rent should be at least 1% of the purchase price (after repairs). In competitive markets, this is often hard to achieve, but it's a good starting benchmark.
50% Rule: Operating expenses (excluding mortgage) typically average about 50% of rental income. This includes taxes, insurance, maintenance, vacancy, and management fees.
70% Rule (for flips): Purchase price should be less than 70% of After-Repair Value (ARV) minus repair costs.
Internal Rate of Return (IRR)
IRR is the annualized rate of return that makes the net present value of all cash flows equal to zero. It's the gold standard for comparing investments because it accounts for the timing and size of every cash flow. Higher IRR is better.
Capitalization Rate (Cap Rate)
Cap Rate = Net Operating Income / Purchase Price. It measures the property's unlevered return. A higher cap rate indicates higher risk and higher potential return. It's useful for comparing similar properties in the same market.
Cash Flow Return on Investment (CFROI / Cash-on-Cash)
CFROI = Annual Cash Flow / Total Cash Invested. This tells you the return on your actual out-of-pocket cash. It should generally increase over time as rent rises but mortgage payments stay fixed.
Many investors hire a property management company (typically 8–12% of rent) to handle these tasks.
Rental property investing is not without risks. Vacancies, unexpected repairs, market downturns, and difficult tenants can all impact returns. Our calculator allows you to test different scenarios (e.g., higher vacancy, higher maintenance) to see how sensitive your investment is to these factors.
Q: What is a good Cap Rate?
A: It depends on the market and property type. Generally, 4–6% is considered low risk (e.g., prime locations), 6–8% is moderate, and 8%+ indicates higher risk but potentially higher returns.
Q: What is a good IRR?
A: An IRR of 10–15% is generally considered good for rental properties. Higher is better, but also comes with more risk.
Q: How accurate is this calculator?
A: It provides a solid financial estimate based on your inputs. However, real-world results will vary. Always do thorough due diligence and consult professionals.
Q: Should I use a loan or pay cash?
A: Using a loan (leverage) can amplify returns (both positive and negative). Our calculator lets you compare both scenarios. Paying cash reduces risk but also lowers potential returns.
Rental properties can be a rewarding investment, but success requires careful analysis. Use our calculator to run the numbers, test different scenarios, and make informed decisions. Remember, real estate is a long-term game—patience and diligence pay off.