Analyze any investment property in seconds. Calculate cash flow, cap rate, and cash-on-cash return.
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This calculator evaluates rental property deals using the same metrics professional investors rely on. Below is what each number means and what to look for.
Cap rate measures the property's return based on its income alone, ignoring financing. It is calculated as (Annual Net Operating Income / Purchase Price) x 100. Net Operating Income (NOI) is your gross annual rent minus vacancy, maintenance, taxes, and insurance, but excluding mortgage payments. A cap rate of 8% or higher is generally strong, 5-8% is decent, and below 5% may only make sense in high-appreciation markets. Cap rate lets you compare properties regardless of how they are financed.
Cash-on-cash return measures the annual return on the actual cash you invested, which is typically your down payment. It is calculated as (Annual Cash Flow / Down Payment) x 100. Unlike cap rate, this metric factors in your mortgage, so it reflects what you actually earn on your out-of-pocket investment. A good cash-on-cash return is generally 8-12% or higher. If you pay all cash (100% down), this equals your cap rate minus the vacancy and maintenance drag.
GRM is a quick screening metric calculated as Purchase Price / Annual Gross Rent. Lower is better. A GRM of 8-12 is generally attractive, while 15-20 suggests the property is expensive relative to its rent. GRM does not account for expenses, so use it only as a first-pass filter. Two properties with the same GRM can have very different cap rates if one has higher taxes or insurance.
This is simply (Monthly Rent / Purchase Price) x 100. The "1% rule" says this should be at least 1.0%, meaning a $200,000 property should rent for at least $2,000/month. In many Florida markets, ratios of 0.5-0.8% are common. A higher ratio generally means stronger cash flow, but properties with lower ratios may still be good investments if they are in appreciating neighborhoods.
This is the minimum monthly rent needed to cover all expenses, including mortgage, taxes, insurance, maintenance, and vacancy reserve. If you can rent the property for more than the break-even rent, you have positive cash flow. This is useful for stress-testing a deal: if market rents are only slightly above break-even, a small rent decrease or unexpected expense could push you negative.
Cash flow is the money left over after all expenses are paid. Positive cash flow means the property pays for itself and puts money in your pocket each month. Negative cash flow means you are subsidizing the property from other income. Most investors target at least $100-200 per month in positive cash flow per unit as a minimum threshold.
The deal verdict is based primarily on cap rate: Strong Deal (cap rate above 8%), Decent Deal (5-8%), Marginal (3-5%), and Poor Deal (below 3%). This is a starting point, not the final word. A "marginal" cap rate in a rapidly appreciating market may still be a great long-term investment, while a "strong" cap rate in a declining area may carry hidden risks.
The calculator includes mortgage principal and interest (P&I), property taxes, homeowner's insurance, a vacancy reserve (percentage of rent set aside for vacant months), and a monthly maintenance allowance. It does not include HOA fees, property management fees, capital expenditure reserves, or closing costs. For a more conservative analysis, increase the maintenance amount to cover these.
The 1.85% default is the approximate average effective property tax rate across Florida. Actual rates vary by county: Miami-Dade averages around 1.02%, while some counties exceed 2%. Always check your specific county's rate for accurate results.
The calculator uses the standard amortization formula: M = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount (purchase price minus down payment), r is the monthly interest rate (annual rate / 12), and n is the total number of monthly payments (loan term in years x 12). At 0% interest, the payment is simply the loan amount divided by the number of months.
Yes, enter the total monthly rent from all units combined. The calculator treats the property as a single investment. For a duplex renting each unit at $1,200/month, enter $2,400 as the monthly rent.