Rental Income Calculator

Capitalization rate (cap rate) is the ratio of Net Operating Income (NOI) to property value. A 6% cap rate means the property generates 6% of its value annually as NOI. Higher cap rates generally mean higher returns but also higher risk.

Cap rates vary by market and property type. In hot markets like NYC or San Francisco, cap rates of 3-5% are common. In Midwest markets, 7-10% is typical. A cap rate above 8% is often considered good for residential rentals.

Cash-on-cash return measures the annual cash flow relative to the cash invested (down payment). It shows how much return you get on your out-of-pocket investment. A 8-12% cash-on-cash is generally considered strong.

Include property taxes, insurance, maintenance (budget 1% of property value per year), property management (8-10% of rent), vacancy (5-10% of rent), HOA fees, and utilities you pay as a landlord.

The 1% rule suggests monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. This is a quick filter, not a comprehensive analysis.

Gross Rent Multiplier (GRM) = Property Price / Annual Gross Rent. A GRM of 10 means the property costs 10 times its annual rent. Lower GRM indicates potentially better value, though it ignores expenses.