Real Estate Calculator

Evaluating Real Estate Property Investments

Real estate is a popular asset class, but making a profitable investment requires looking past the aesthetic appeal of a property and analyzing the hard numbers. This calculator compiles critical investment metrics to help you determine whether a rental property will produce positive cash flow and satisfy your target rate of return.

Key Real Estate Investment Metrics

• Net Operating Income (NOI): The annual income generated by a property after subtracting all operating expenses. Operating expenses include property taxes, insurance, repairs, property management, and utilities, but exclude mortgage interest and principal payments.
• Capitalization Rate (Cap Rate): The ratio of Net Operating Income to the purchase price. It represents the property's estimated natural return rate, assuming it was purchased entirely in cash.
• Monthly Cash Flow: The actual cash you pocket each month after collecting rent and paying both the operating expenses and the monthly mortgage payment.
• Cash-on-Cash Return: The annual cash flow divided by the total out-of-pocket cash invested (which includes the down payment and closing costs). This measures the return on the actual money you put into the deal.

Investment Formulas

The calculations are computed as follows:

• $$\text{NOI} = (\text{Monthly Income} - \text{Monthly Operating Expenses}) \times 12$$
• $$\text{Cap Rate} = \left( \frac{\text{NOI}}{\text{Purchase Price}} \right) \times 100$$
• $$\text{Cash Flow} = \text{Monthly Income} - \text{Monthly Operating Expenses} - \text{Monthly Mortgage}$$
• $$\text{Cash-on-Cash Return} = \left( \frac{\text{Monthly Cash Flow} \times 12}{\text{Down Payment} + \text{Closing Costs}} \right) \times 100$$