Investment Property Calculator
Calculate profits on your next rental property project
Rental Property Calculator Guide
This section is designed to help you understand every element that goes into our rental property calculator.
Standard Costs When Purchasing A Rental Property
When it comes to down payments, bigger is usually better. This is because the bigger your down payment, the smaller your monthly repayment will be. This can save you a large amount in interest that you don’t have to pay on the loan. It also means that your monthly for the will be lower, resulting in more every month.
Interest Rate (%)
The higher the interest, the more you will pay to your loan provider over the full course of the loan (usually 30 years).
With that being said, it is common for loans to have slightly higher interest rates than a standard home , due to the increased risk involved with managing a property and its tenants.
Loan Terms (Length of Loan)
In this day and age, most people take out a 30 year for properties. However, it is also common to use a 20 year loan, if you are in good financial standing and your loan provider is open to negotiation.
Closing costs are typically paid when you complete the purchase of your . Usually, closing costs will range from 2-5%. To be on the safe side, we recommend using 3-4% of the for the amount.
Recurring Operating Expenses for Rental Property
The first thing you need to know about property is that you can deduct most of the property from the you receive, before working out the taxable earnings of the property. Crucially, the interest component of your is one of these deductible , which can greatly reduce the amount of you end up paying.
The second thing you need to know is that you are then taxed based on the that you fall into. So if you make $4000 per month, and your generates $1000 per month (after are deducted), you would essentially fall into the $5000 dollar per month bracket, and this is what you would apply to the property.
Please note – If the property is purchased in the name of a company, the would be based on the statement and sheet of the company. implications would obviously differ. In this case the
There is no exact percentage for property insurance, as it depends on the risk profile and the of the property.
However, it is worth pointing out that in 2020, the average cost for insurance was $1093.
So, if you’re unsure of what to put in this field, $1100 is an average number that you can use as a placeholder. Just keep in mind that your final property insurance amount will obviously be different.
Homeowners Association (HOA) Fees
HOA Fees are only applicable to certain types of properties (usually apartments and condos mainly), but some single family homes may also have HOA fees.
Broadly speaking, HOA fees tend to range from $100 to $500, depending on the property.
The amount you spend on property maintenance may vary each year, but you should budget for at least 1% of the property’s value. This is a rule of thumb that many landlords will use when calculating the property maintenance cost.
Additional Costs To Budget For
is the percentage of the year that you can expect the property to be without a tenant.
It is generally recommended to apply a of 5% or more for an apartment or single family home. This is a very real expense for landlords and it should be factored into your calculations.
Property Management Fee
Typically, the property management fee will be between 4-12 percent of the gross .
Alternatively, certain property management companies may charge a flat monthly fee.
Ultimately, the onus is on you to find a professional property management company that charges a fair fee, if you decide to make use of one.
Rental Property Calculator FAQ
How do you calculate rental property profit?
To workout the profit of a , it is often more helpful to think in terms of the , mainly because it is relatively easy to calculate, and it’s also easy to workout if you eventually sell the property.
The basic formula for net operating income is: Annual Rental Income – Annual Property Expenses
So if you have a property that generates $20,000 in , and the total for the year come to $12,000, your would be $8000. You could call this $8000 in profit.
Then if you decided to sell the property, you can calculate the by adding all the made from the property (including the profit from the sale and for the duration of your ownership) and deducting all the incurred during your ownership. The final total can be treated as profit.
The only extra thing worth mentioning if you sell the property eventually,you will have to pay a (ie the property increased in value). This article has more info if there was how to minimize capital gains when selling a house.
What Is Cash Flow From Rental Property?
from is the amount of you are left with, after subtracting the property from the . Typically, you would calculate for properties on either a monthly or yearly basis.
- = Total Monthly Monthly – Total
- Annual = Total Annual – Total Annual
What is a good vacancy rate for rental property?
Put it this way. A higher indicates that the property will spend more time without tenants. During these periods without tenants, the cost of will fall onto the property owner.
Typically, a of 5% is a good guideline for single family homes and apartments. Of course it could be lower, but it could also be higher if your tenants experience financial difficulties or decide to move.
Ultimately, it is in your best interests to assume a that you use. between 5 and 7 percent. If you hold the property for a long time, this is a cost that will almost certainly impact the profitability of your , so it must be factored into the
How Do You Analyze A Rental Property?
First off, you need to compare the cost of the property with the expected that it is likely to generate.
One of the shortcuts you can use is called the 2% rule. This rule suggests that a is a good if the equates to 2% (or more) of the property’s price. So if you are contemplating a $300,000 property, the would need to be $6,000 or more to meet the 2% guideline.
Even though the 2% rule is a useful shortcut, it doesn’t give you all the details you need to make a confident owner. decision. Fortunately, our should help you dissect the deal in much greater detail. It factors in all the major costs that you can expect to encounter as a newly appointed
Is owning a rental property worth it?
The goal of our is to help you determine if your target is actually worth it. In some cases, you might find that the numbers don’t quite add up, while in others, you could see enough green flags to pull the trigger on the deal.
If the numbers are favorable, a passive cow that requires very little time and energy to manage. Better yet, the price of the property is likely to increase over time, which could generate a sizable profit if you decide to sell the property later down the line. In other words, you get the benefits of and the benefits of an appreciating asset combined into one package. can become a
In the end, it’s hard to fault an positive that could last a lifetime, and beyond. So from our perspective, it’s definitely worth it if the numbers add up. Our can help you understand if that is the case. with ambitions of owning . It remains a powerful vehicle with amazing potential for generating
How Do You Work Out Cash On Cash Return?
The best way is to simply use the On Formula
/ Actual Invested * 100On = Annual Pre-
When using this formula, it is important to note that as a you don’t need to include the financing costs. Instead, you are simply taking the amount of money that the property generated, and dividing it by the amount of money that was spent to acquire the property, then multiplying by 100% to get the -on- .
What Is Gross Rental Yield?
is a measure of a how profitable a property is. To work out the , you divide the annual by the , and then multiply by 100 to get the rental yield percentage.
How do you workout property depreciation?
incurs. is a deductible expense that you can use to lower the total amount of that your
To workout property , you only need to know 3 things:
- The value of the property
- The value of the land the property is built on
- The useful life of the property (this is 27.5 years for all residential property in the US)
For example, let’s assume that the is $250,000, the land value is $75,000 and it’s a residential home with a useful life of 27.5 years. In this case, the deprecation would work out to: = ($250,000 – $75,000)/27.5 = $6,363.63
What is depreciation recapture?
is a that gets applied to your property if it is eventually resold. It is directly connected to the total amount mentioned above.
In essence, you take the annual ). amount of the property, multiply that number by 27.5 (the total useful life of the property) and then multiply that number by 25% (the maximum for
Following on from the example above, that would mean:
$6,363.63 * 27.5 * 0.25 = $43,750
In other words, once you have worked out the annual that you are liable to pay if the property is sold. of your property, you can use that number to calculate the total amount of
Additional Real Estate Calculators & Resources
ARV Calculator: Quickly assess the After-Repair Value of a property with our user friendly ARV Calculator.
Hard Money Calculator: To figure out the ROI of a fix and flip, you need a comprehensive Hard Money Calculator. It allows you to workout the monthly repayments, analyze net operating income, calculate the return on investment when you sell the property.
BRRRR Calculator: Each step in the Buy, Rehab, Rent, Refinance, Repeat (BRRRR) requires detailed analysis before you proceed with the deal. Fortunately our BRRRR Calculator breaks the process down into simple phases that are pretty easy to understand.
Home Appreciation Calculator: To workout how much your home will be worth in the future, you simply need to know the interest rate and how long you expect to hold the property for. With our simple Home Appreciation Calculator, you can workout the future value of your home very quickly.
Cap Rate Calculator: Cap Rate is a simple formula that helps investors work out how profitable an investment property is likely to be. Our Cap Rate Calculator makes this easy to do, in very little time.
FlipScout: FlipScout is a free search engine for property flippers. It lets you find properties that you can earn the highest return on when completing a fix and flip or fix-to-rent project. You can learn more about FlipScout here.
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