Note: 1%/2% rule cash flow estimates use your current expense inputs.
Down Payment Comparison
How different down payment levels affect monthly CF and CoC return
Scenario
Down $
Loan $
P&I / mo
PMI / mo
Monthly CF
CoC %
Projection Assumptions
%
%
%
Total Cash Flow 10-yr
—
Equity Built
—
Property Value
—
Total Wealth Created
—
Avg Annual CoC
—
PMI Drops
N/A
Wealth Build-Up Over 10 Years
Hold Property
—
Equity + cumulative cash flow
Sell Property
—
Sale proceeds after 6% costs + CF
S&P 500 Alt.
—
Cash invested at 10% annual return
Year-by-Year Breakdown
Year
Monthly Rent
NOI
Cash Flow
Property Value
Loan Balance
Equity
Cumul. CF
CoC %
DSCR
PMI
Frequently Asked Questions
What is a good cap rate for a rental property?
A cap rate of 6–8% is generally considered good for residential rentals. Below 4% is low yield; above 8% often signals higher risk or a value-add opportunity. Cap rates vary significantly by market — gateway cities like NYC run 3–4% while secondary markets often yield 7–9%.
What is DSCR and why does it matter?
DSCR (Debt Service Coverage Ratio) = NOI / Annual Debt Service. It measures how many times over the property's income covers its mortgage payments. Most lenders require 1.25×. Below 1.0× means the property literally can't cover its own debt from rental income.
What is break-even occupancy?
Break-even occupancy is the minimum occupancy rate needed to cover all expenses including debt service. A 70% break-even means the property stays cash-flow positive even if 30% of the time it sits vacant. Below 70% is very resilient; above 90% leaves little margin for error.
What is the 1% rule in real estate?
The 1% rule says monthly rent should be at least 1% of the purchase price as a quick screening filter. A $300,000 property should rent for $3,000/mo. It's a heuristic — not a substitute for full analysis — and harder to meet in expensive markets.
What is the 50% rule?
The 50% rule estimates operating expenses (excluding mortgage) at about 50% of gross rent. If taxes + insurance + maintenance + CapEx + management + vacancy losses exceed 50% of gross rent, cash flow will be thin. This calculator shows your actual expense ratio for a more precise analysis.
What is cash-on-cash return?
Cash-on-cash return = Annual Cash Flow / Total Cash Invested × 100%. It measures the return on your actual out-of-pocket investment (down payment + closing costs + initial repairs). Unlike cap rate, it accounts for financing. A 5–8% CoC is fair; 10%+ is excellent.
What is NOI in rental property analysis?
Net Operating Income = Effective Gross Rent − All Operating Expenses, before mortgage payments. NOI is the key metric for property valuation (cap rate = NOI / value) and loan underwriting (DSCR = NOI / debt service). A higher NOI means a more valuable property regardless of financing.
What is the BRRRR strategy?
BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a distressed property below market value, renovate it to increase the After-Repair Value (ARV), rent it out, then refinance based on the new appraised value to pull out most or all of your original capital — which you then deploy into the next deal.
What is GRM (Gross Rent Multiplier)?
GRM = Purchase Price / Annual Gross Rent. It's a quick valuation metric. A GRM under 10 is excellent; 10–14 is good; above 15 means you're paying a high multiple of gross rent. Unlike cap rate, GRM ignores expenses, so use it alongside other metrics.
What is negative leverage in real estate?
Negative leverage occurs when your mortgage interest rate exceeds the cap rate. When this happens, borrowing money actually reduces your overall return — you'd earn more by purchasing with all cash. The calculator flags this condition in the alert section.
Does PMI apply to investment properties?
Yes — if you put less than 20% down on an investment property, lenders typically require PMI at approximately 0.5% of the loan balance per year. This calculator automatically adds PMI when down payment is below 20% and shows when it will drop off as equity builds.
How do I find the max offer price for a target return?
Use the Target Solver panel below the inputs. Enter your target cash-on-cash return percentage, select "Max Offer Price" mode, and the calculator uses binary search to solve the exact purchase price that achieves your target CoC. You can also solve for the required monthly rent to hit a target return.
How does rent growth affect long-term returns?
Rent growth is one of the most powerful long-term variables. At 3% annual growth, rent doubles in 24 years while your mortgage payment stays fixed — dramatically improving cash flow over time. The Wealth Projector shows this compounding effect year by year.
What is a good cash-on-cash return?
5–8% CoC is fair for stable markets. 8–10% is good. 10%+ is excellent and often found in higher-risk or value-add deals. Compare against alternatives: the S&P 500 averages ~10%/yr with zero management burden, so rental investing must offer sufficient premium for the effort.
Should I hold or sell my rental property?
The Wealth Projector's "Hold vs Sell" tab computes three outcomes: (1) Hold — total equity + cumulative cash flow at end of hold period; (2) Sell — net proceeds after 6% selling costs plus all cash flow earned; (3) S&P 500 — if you had invested the same cash at 10%/yr. The winner is highlighted with a star.
How to Use This Calculator
1
Enter Property Details
Input the purchase price, down payment, loan terms, and expected rental income. Select your property type for quick presets.
2
Add Operating Expenses
Include property taxes, insurance, maintenance, CapEx reserve, vacancy rate, management fees, and HOA if applicable.
3
Review Returns & Metrics
See NOI, cap rate, cash-on-cash, DSCR, break-even occupancy, and long-term wealth projections with Hold vs Sell analysis.
Formula & Methodology
Net Operating Income
NOI = Gross Rent − Vacancy − Operating Expenses
Annual income after expenses but before mortgage payments. The key metric for property valuation and loan underwriting.
Result: Refi at 75% of ARV = $285,000 — recovers all original capital. BRRRR complete with near-infinite effective CoC on recycled equity.
Evaluating Rental Property Investments
Cash Flow Is King
Positive monthly cash flow after all expenses is the foundation of successful rental investing. Appreciation is a bonus, not a strategy. A property that loses money monthly is a speculation, not an investment.
The True Cost of Being a Landlord
Budget 5–10% for vacancy, 5–10% for repairs and maintenance, and 8–10% for property management even if self-managing initially. Underestimating expenses is the most common mistake new investors make.
Leverage Amplifies Returns — and Risks
With 25% down on a property that appreciates 3% annually, your equity grows at 12% due to leverage. But leverage cuts both ways — in a downturn, your losses are also magnified. Always maintain adequate cash reserves and verify DSCR remains above 1.25×.
Why DSCR Matters Beyond Cash Flow
Even a cash-flow positive property can have a DSCR below lender minimums if NOI is thin relative to debt service. Monitoring DSCR ensures the property qualifies for refinancing — critical for BRRRR strategies and portfolio growth.