Rental Property Investment Calculator

Net Annual Income is the total yearly income minus the total yearly expenses.

Formula: Yearly Gross Income - Yearly Expenses

Monthly Cash Flow is the total monthly income minus the total monthly expenses.

Cash Flow creates opportunity to reinvest into another property or safety for a rainy day.

Formula: Monthly Gross Income - Monthly Expenses

This metric evaluates the annual return on an investment property, expressed as a percentage of the initial cash investment.

It tells the investor how much profit they will receive for each dollar invested.

Some investors use a 7% minimum return while others only consider 15% or higher.

Formula: Net Annual Income / Total Initial Expenses

This metric helps determine if a property is worth further consideration.

Many investors use the 1% Rule, which states that the monthly rent should be at least 1% of the purchase price (i.e, $100,000 purchase price would need to get $1,000 monthly rent).

Formula: Monthly Rent / Purchase Price

Gross Yield provides investors with an idea of how much income a property generates, relative to its total purchase price.

Formula: Annual Rental Income / Total Property Price*

*Total Property Price = Purchase Price + Closing Costs + Renovations + Other Initial Expenses (does not include down payment)

This screening metric is the number of years it would take to pay off the property (without consideration to expenses such as repairs, operating costs, vacancies, etc.).

It is especially useful when comparing properties in a given market.

A higher GRM indicates that the property is overpriced, while a lower GRM indicates that the property is underpriced.

A 7 or lower is considered "good".

Formula: Purchase Price / Gross Annual Rent

The Net Rent Multiplier (NRM) metric is used to...

This is the total potential income for the year, assuming no vacancies.

Formula: Rental Income * 12

GOI is the total yearly income minus the vacancy rate. The vacancy rate is typically estimated at 1 month per year.

Formula: Yearly Gross Income - Vacancy Rate

NOI is the Gross Operating Income minus the Operating Expenses.

Formula: Yearly Gross Income - Yearly Operating Expenses

Note: Cap Rate is generally used for Commercial Real Estate.

The cap rate is the most popular measure through which investments are assessed for their profitability and return potential. The cap rate simply represents the yield of a property over a one-year time horizon assuming the property is purchased on cash and not on loan. The cap rate rate indicates the property's intrinsic, natural, and un-levered rate of return.

The rate also indicates the duration of time it will take to recover the invested amount in a property (e.g., a property having a cap rate of 10% will take around 10 years).

Many analysts consider a "good" cap rate to be around 5% to 10%, while a 4% cap rate indicates lower risk but a longer timeline to recoup an investment.

Generally, a high capitalization rate will indicate a higher level of risk, while a lower capitalization rate indicates lower returns but lower risk.

Formula: Net Operating Income / Current Market Value

Lenders will refuse to finance a property with a DSR of less than 1.0, meaning that the property's NOI is less than its annual debt service.

Formula: Net Operating Income / Annual Debt Service