Real Estate Calculator

Real estate investment analysis involves evaluating the financial performance of rental properties. Key metrics like cap rate, cash-on-cash return, and ROI help investors determine if a property is a good investment.

Key Real Estate Metrics

• Cap Rate: Net operating income divided by property value. Shows annual return on investment.
• Cash-on-Cash Return: Annual cash flow divided by cash invested. Measures cash flow efficiency.
• Net Operating Income (NOI): Rental income minus operating expenses. Core property profitability.
• Return on Investment (ROI): Total return divided by initial investment over a period.
• Internal Rate of Return (IRR): Discount rate that makes NPV zero. Accounts for time value of money.

Cash Flow Analysis

Positive cash flow occurs when rental income exceeds all expenses including mortgage payments. Cash flow is the lifeblood of real estate investing and determines how much income the property generates.

Expense Considerations

• Vacancy: Account for periods when the property is unoccupied
• Maintenance: Budget for repairs and upkeep (typically 1% of property value)
• Property Management: 8-12% of rent for professional management
• Taxes and Insurance: Annual costs that vary by location
• Capital Expenditures: Major repairs and improvements

Appreciation and Leverage

Real estate investments benefit from leverage (using borrowed money) and potential appreciation. Leverage amplifies returns but also increases risk. Appreciation can significantly enhance long-term returns.

Risk Factors

• Market Risk: Local economic conditions affect rents and property values
• Vacancy Risk: Difficulty finding tenants or rent collection issues
• Interest Rate Risk: Rising rates increase borrowing costs
• Management Risk: Challenges with property management
• Liquidity Risk: Real estate is not easily converted to cash