Real Estate Investing & Property Calculations Guide
Capitalization rates, cash-on-cash yield, mortgage closing costs, and seller net sheets.
Real estate investing is numbers-driven. Successful property acquisitions depend on evaluating Net Operating Income (NOI), Capitalization Rates (Cap Rate), Cash-on-Cash Return, and total closing costs rather than emotional impulse.
Net Operating Income (NOI) = Gross Rental Income - Operating Expenses (excluding mortgage debt service).
Scenario: An investor purchases a rental property for $300,000. Gross annual rent is $36,000 and operating expenses (taxes, insurance, maintenance, vacancy) total $12,000.
- Purchase Price: $300,000
- Gross Rent: $36,000
- Expenses: $12,000
- NOI = $36,000 - $12,000 = $24,000
- Cap Rate = ($24,000 / $300,000) × 100%
- Cap Rate = 8.0%
- Never exclude maintenance reserves and vacancy allowances (typically 5%–10% of gross rent) when calculating real estate NOI.
- Cap rate measures property yield without financing; Cash-on-Cash return measures your actual return on out-of-pocket down payment cash.
- Buyer closing costs typically range between 2% and 5% of the loan amount; seller closing costs can reach 6% to 10% including agent commissions.
- Use our Rental Yield and Mortgage calculators to model cash flow under different loan interest rates.
Put the formulas above into practice with these free tools:
Rental Yield Calculator
Gross and net rental yield from price, rent, and expenses.
Cap Rate Calculator
Capitalization rate and implied value of an income property.
Cash-on-Cash Return Calculator
Yearly cash flow as a percentage of the cash you put into a rental.
Rental Property Cash Flow Calculator
Monthly and yearly cash flow after every cost of a rental.
Gross Rent Multiplier Calculator
GRM of a rental and its value at the market multiplier.
Rent-to-Price Ratio Calculator (1% Rule)
Check a rental against the 1% and 2% rules of thumb.
DSCR Calculator (Debt Service Coverage Ratio)
Debt service coverage ratio and the largest loan your income supports.
Down Payment Calculator
Down payment, closing costs, and total cash needed to buy a home.
Closing Costs Calculator
Estimate buyer closing costs from the loan and the price.
Property Tax Calculator
Annual and monthly property tax from value, rate, and exemptions.
Home Appreciation Calculator
Future home value and gain at a steady yearly growth rate.
Home Equity and LTV Calculator
Equity, loan-to-value ratio, and how much you could borrow against it.
What is considered a good cap rate?
Generally 5% to 8% in stable metropolitan markets, and 8% to 12% in higher-risk or secondary emerging markets.
What is the 1% rule in real estate?
A quick screening heuristic stating monthly gross rent should equal at least 1% of the property purchase price (e.g. $200k property renting for $2,000/mo).
What is Debt Service Coverage Ratio (DSCR)?
DSCR = Net Operating Income / Annual Debt Service. Lenders typically require a minimum DSCR of 1.20 to 1.25 to approve commercial or investment mortgages.