Question 1

What is a good cap rate for rental property?

Accepted Answer

A cap rate of 5-10% is generally considered good for residential rental properties. Higher cap rates indicate higher returns but may also mean higher risk. Markets with strong appreciation may have lower cap rates (3-5%) but still be good investments due to equity growth.

Question 2

How do you calculate cash-on-cash return?

Accepted Answer

Cash-on-cash return equals annual pre-tax cash flow divided by total cash invested (down payment plus closing costs). A cash-on-cash return of 8-12% is generally considered good. This metric shows how hard your actual cash investment is working compared to alternatives like stocks or bonds.

Question 3

What is the 1% rule in real estate investing?

Accepted Answer

The 1% rule states that monthly rent should be at least 1% of the purchase price. For example, a $300,000 property should rent for at least $3,000/month. While useful as a quick filter, it doesn't account for expenses, location, or appreciation — which is why a full analysis like this one matters.

Question 4

What expenses should I include in rental property analysis?

Accepted Answer

Key expenses include: mortgage payment (principal and interest), property taxes, insurance, maintenance (typically 1% of property value per year), vacancy allowance (5-10%), property management (8-12% of rent), and HOA fees if applicable. This calculator includes all of these with sensible defaults you can override.

Will this propertycash flow?

Will this property
cash flow?