Rent minus mortgage is not profit. Price in the empty month, the roof and the management, and the same property gives you a very different number.
Every landlord learns that from a boiler, a void month or a roof. None of those arrive monthly, so none of them show up in a calculator that only counts what happened. Type your property in and see the same year both ways.
| A year | The way most calculators do it | With vacancy, reserve and management priced in |
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Simplified on purpose. The three allowances are the argument of this page, and the percentages above are starting points to change, not survey data: a property in a strong letting market with a long tenancy justifies less vacancy, an older building justifies more reserve, and self-managing landlords often set management to zero — though charging your own time nothing is how a portfolio quietly stops being worth running. Cap rate uses today's value and ignores the loan on purpose, so a financed property can be compared with one bought for cash. Cash-on-cash includes the loan on purpose, because that is what your own money is earning. Depreciation is not here at all: it is a tax figure, not cash.
A capital reserve is money put by for the things that wear out rather than break - the roof, the boiler, the windows, the kitchen. They are certain, they are expensive, and they never arrive in the month you have spare cash. Setting aside a share of the rent every month turns a five-figure surprise into a line you have already paid. Older buildings and older systems justify a larger share.
That is your call, but it is worth being honest about what zero means. Setting management to nothing says your time is free, and it makes the property look better than an identical one run by an agent. It also hides the real cost of the day you stop being able to do it - illness, a move, a second job. Many landlords put in a smaller figure rather than zero for exactly that reason.
Cap rate is net operating income divided by what the property is worth, and it deliberately ignores your mortgage - that is what lets you compare a financed property with one bought for cash, or with a property down the road. Cash-on-cash is your cash flow divided by the money you actually put in, and it deliberately includes the mortgage, because that is the return your own money is earning. They answer different questions and a good decision usually needs both.
It varies by lender, loan type and market, so treat any single figure with suspicion - but 1.20 comes up often as a floor for a rental loan, meaning net operating income of $1.20 for every $1.00 of debt service. Below 1.00 the property does not cover its own loan out of operations. Work it out on the number that includes vacancy and reserves, not the flattering one, because that is closer to what an underwriter will build.
No. It sizes up one property in a minute on numbers you estimate. It does not record which month the rent actually arrived, which tenant is in arrears, which expense belongs on which Schedule E line, or how many miles you drove to that inspection - and those are what a return is built from. That is what the full spreadsheet does, for up to twelve properties.
The calculator above is deliberately simple. The full spreadsheet does the whole job — up to twelve properties, rent due against rent received month by month, every expense tagged with its Schedule E line, both 2026 mileage rates and the returns worked out per property and across the portfolio. It opens in Excel and works just as well in free Google Sheets.
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