How this calculator works
A rental property is a small business, and like any business it lives or dies on the numbers — not the listing photos. The trap most new investors fall into is comparing rent to the mortgage payment and calling the difference "profit." Real cash flow only appears after you subtract the costs that don't show up on a mortgage statement: vacancy between tenants, property management, ongoing maintenance and repairs, taxes, and insurance. Skip those and a deal that looks like it makes $500 a month can quietly lose money.
This calculator runs the full pro-forma the way an investor or lender would. It builds your net operating income, subtracts financing, and reports the metrics that actually decide a deal: monthly cash flow, cap rate, cash-on-cash return on the money you put in, and the DSCR a lender uses to approve the loan — plus the 1% rule as a quick gut check.
The metrics, defined
Cap rate measures the property's return ignoring your loan — useful for comparing deals. Cash-on-cash measures the return on the actual cash you put in, so leverage matters. DSCR tells you (and the bank) whether income covers the debt; most lenders want at least 1.20–1.25.
- NOI ≈ $20,300 after the vacancy allowance and operating costs (tax, insurance, management, maintenance).
- Cash flow ≈ +$116/month after the ~$1,573 mortgage payment — thin but positive.
- Cap rate 6.8%, cash-on-cash 1.7%, DSCR 1.07 — financeable but tight.
- It fails the 1% rule ($2,700 is 0.9% of price), which is common at today's rates — exactly why a full analysis beats a shortcut.
Acronyms used on this page
- DSCR
- Debt-Service Coverage Ratio
- NOI
- Net Operating Income
- ROI
- Return on Investment
- HOA
- Homeowners Association
- CoC
- Cash-on-Cash return
Reading the result honestly
The single most important habit is to budget for the costs you can't see today. A unit won't be occupied 100% of the time, the water heater will fail, and at some point you'll want someone else to take the 2 a.m. call. Investors who ignore vacancy, maintenance, and capital expenditures aren't finding better deals — they're just measuring wrong. A genuinely good rental clears a healthy cash flow after all of it, holds a cap rate competitive for its market, and carries a DSCR comfortably above 1.2 so a rough patch doesn't sink it. If a deal only works by assuming nothing ever goes wrong, it doesn't work.
Frequently asked questions
How do you calculate rental cash flow?
Rent minus every expense including the mortgage. Subtract a vacancy allowance, then operating costs (tax, insurance, management, maintenance) for NOI, then the mortgage. What's left is cash flow — positive or negative.
What's a good cap rate?
NOI ÷ price, ignoring financing. Many investors target ~5–8%, but it's market-dependent: lower cap rates suit lower-risk/higher-growth areas. Only compare within the same market.
What is the 1% rule?
A quick screen: monthly rent should be ≥1% of price ($3,000 on a $300k home). It's a rough first filter, not a full analysis — and few properties pass it when rates are high.
What DSCR do lenders want?
Most want at least 1.20–1.25, meaning net income covers the debt with margin to spare. Below 1.0 the property doesn't cover its own loan from operations.