Rental Property Calculator

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Rental Property ROI Calculator Guide​

MetricFormulaMinimum Score
Return on Investment (ROI)Net rental income / cost of investmentOver 5%
Annual cash flowAnnual Gross income - all expenses> $0
Net operating incomeAnnual income - annual operating expenses (not including interest and renos)> $0
Cash-on-Cash ReturnAnnual Cash flow / total cash invested> 10%
CAP RateAnnual Net operating income / current home value6% to 10%, higher cap rate means more risk and return
50% RuleOperating expenses >50% of gross monthly rental income50%
1% RuleGross monthly rental income > 1% of purchase price1%
FAQ About the Rental Property Calculator​
What is a good ROI on a rental property?

ROI compares your net rental income to the cost of your investment, including maintenance, property taxes, debt and vacancy. Generally speaking, an ROI of 5% to 10% is considered a good investment. A rental property with an ROI of over 10% is definitely a good investment. If you are considering a rental property with a lower ROI, you may adjust some aspects like the property’s price or your rental amount to improve your ROI.

What is the 50% rule?

The 50% rule is a quick way to determine whether your rental is a worthwhile investment. The 50% rule says that the rental property’s operating expenses should not exceed 50% of its income. These expenses include maintenance, utilities, and insurance but do not include the debt associated with maintaining your property, like loans, interest, and mortgage payments. The 50% rule is essential because it helps you assess the ancillary expenses related to your property. Extra costs like Home Owner’s Association fees, taxes, and condo fees can turn a rental that looks profitable on the surface into a bad investment.

What is the 1% rule?

The 1% rule helps you quickly assess whether the purchase price for your rental property is reasonable relative to the rental income you expect to earn. According to the 1% rule, your rental property’s monthly rent should be 1% or more of the purchase price. That means if you are purchasing a property for $100,000, you should expect to earn at least $1,000 per month in rental income. The 1% rule is just one of the ways you can determine whether a rental property is a good buy, and it doesn’t apply to all properties.

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