Rental property forecaster
Set the purchase, the rent and the costs, add or rename expense lines, then slide the year you would sell. Every figure updates as you go.
How this tool works
Year 1 starts with the rent less vacancy: the rent collected. Operating costs come off next: taxes, insurance, dues and your expense lines (a percent line is a share of the rent collected). What is left is net operating income (NOI). The mortgage payment comes off NOI and leaves the cash flow.
- Cap rate: NOI divided by the price.
- Cash on cash: year 1 cash flow divided by the cash put in, the down payment and closing costs.
- DSCR: the rent divided by the full payment (principal and interest, taxes, insurance and dues), the way most DSCR lenders measure it. Some lenders use net operating income instead, and each sets its own minimum.
- Break-even occupancy: the share of the year the property must be rented to cover its costs and the payment.
- Gross rent multiplier: the price divided by a year's rent.
Each later year grows the rent, the fixed costs and the value by the assumptions you set. A sale at the end of the year you choose pays the selling costs and the loan balance. The total return is the cash flow to date plus what the sale leaves, less the cash put in; the yearly figure is the internal rate of return on those cash flows.
The figures are before income taxes and depreciation, and the growth rates are assumptions, not forecasts. For a loan, lenders usually use the lower of the lease and the appraiser's market rent.
A conventional loan on a rental needs at least 15% down on one unit and 25% on two to four. DSCR loans qualify on the rent instead of your income and usually cost more than agency loans. See calculators for investors, DSCR loans and becoming an investor.
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Loans it explains
Common questions
Why can cash flow be negative when the DSCR is above 1.00?
DSCR compares the rent with the payment only: principal, interest, taxes, insurance and dues. Cash flow also pays for vacancy, repairs, reserves, management and other costs. A rental can qualify for a DSCR loan and still cost money each month.
What is a good cap rate?
There is no single figure. Cap rates vary with the market, the type of property and the rates of the day, so compare a property with similar rentals nearby rather than with a rule of thumb.
What does interest only change?
Some DSCR loans offer an interest-only period, often the first 10 years. The payment is lower, so cash flow and the DSCR rise, but the balance does not come down in that time, and the payment rises when the period ends.
Does this count income taxes?
No. The figures are before income taxes and depreciation, which depend on your own tax situation.
See it with your own numbers
It starts with a short conversation. Daniel builds your Mortgage Plan from it, then sends it right before a second call, where you go through it together.