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Mortgage Payment:
The monthly check you send the bank (or lender).
It usually covers:
- Principal (pays down the loan)
- Interest (the cost of borrowing)
- Sometimes taxes & insurance (if they’re escrowed)
Common loan lengths: 15, 20, or 30 years.
Note: This calculator shows just principal + interest—taxes and insurance are extra.
Total Monthly Expenses:
Your all-in cost to own and operate the property each month.
Includes:
- Mortgage (principal + interest)
- Property taxes
- Insurance
- Property management
- Repairs & maintenance (R&M)
- Capital expenditures (CapEx)
- Vacancy reserves
Use this number to see your true cash flow—not just what’s left after the mortgage.
Monthly Cashflow:
What’s left after all the bills are paid.
Formula:
Rental income – total monthly expenses = cashflow
Covers everything: mortgage, taxes, insurance, repairs, management, and more.
Positive cashflow = profit in your pocket
Negative cashflow = you’re feeding the property each month
This is the number that tells you if the deal really works.
Cash-on-Cash Return:
Shows your actual return based on the cash you invested.
Formula:
Cash Flow ÷ Cash Invested = Cash-on-Cash Return
Example:
You invest $40K total and make $4K/year in cash flow = 10% return.
Use this to compare real investment performance (especially if you’re using leverage).
Cap Rate (Capitalization Rate):
Used to evaluate the return on a rental property—without factoring in financing.
Formula:
Cap Rate = Net Operating Income (NOI) ÷ Purchase Price
Example:
If a property nets $12,000 per year and costs $200,000:
Cap Rate = 12,000 ÷ 200,000 = 6%
Higher cap rates = more return, but often more risk.
A good target for this number is 4% – 12%.
50% Rule (for Expenses):
Quick shortcut: assume half of your rental income will go to operating expenses.
Example:
Rent = $2,000/month
Estimated expenses = $1,000/month
That covers things like maintenance, vacancies, taxes, insurance, and management.
It’s not exact—but it’s a solid filter to spot deals that might bleed cash.
1% Rule (for Rentals):
Quick test: does the monthly rent equal at least 1% of the purchase price?
Example:
Property price = $200,000
Monthly rent = $2,000
That’s 1%—a decent rule of thumb to start your analysis.
It’s not perfect, but it helps you avoid low-yield deals right away.
Use of this calculator signifies your acceptance of Permanent PTO’s Terms of Use and the conditions set forth below. Calculations are based on a 31-day month. The calculators provided by Permanent PTO are intended solely for informational and educational purposes and do not constitute investment advice. Permanent PTO advises users to consult with a qualified real estate professional prior to making any investment decisions. The results generated by these tools are estimates and may not reflect the actual performance of your investments. Permanent PTO shall not be held liable for the consequences of any decisions or actions taken based on or as a result of the information provided by these calculators.
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