Rental Return Report
What is this rental really earning?
Rent is not profit. Empty days, management, taxes, insurance, repairs and the mortgage all come out first. Put in your numbers to see what is left, where every rent dollar goes, and what the rental could build over the years in all four ways a rental makes money.
The numbers below are examples to get you started. Change them to yours.
After every cost you entered, this rental puts in your pocket about
- Yearly rent after vacancy
- A full year of rent, minus the share you expect to lose to empty days.
- Yearly operating costs
- What it costs to run the rental each year: management, tax, insurance, repairs, HOA and other costs. The mortgage is not in it.
- Net operating income
- Rent after vacancy minus operating costs. It is what the property earns before any loan payment.
- Cap rate
- Net operating income divided by the property's value. It lets you compare properties as if each were bought with cash.
- Cash flow after the mortgage, per month
- Cash flow after the mortgage, per year
- What is left after operating costs and the mortgage. This is the money that reaches your pocket. Below zero means you pay the difference.
- Cash-on-cash return
- A year of cash flow divided by the cash you have in it. It shows what your own money earns each year.
Cap rate at a glance
Cap rate looks at one year of income. The long-run view below adds the other ways a rental makes money.
Get a free rental analysis
Scan the code or call 719.581.RENT. Chuck Kelley, our Broker/Owner, will look at what your rental should rent for. No obligation.
These are projections from the numbers you typed. Growth is not guaranteed, and home values can fall. This is not investment or tax advice.
Where each rent dollar goes
Show the numbers as a table
| Where it goes | Per year | Of each rent dollar |
|---|
From a year of rent to cash flow
Show the numbers as a table
| Step | Per year |
|---|
What it could build over the years
Cash flow is only one of the four ways a rental makes money. Here are all four, from your numbers and the growth rates under Looking ahead.
These are projections from the numbers you typed. They are future dollars, not adjusted for inflation. Growth is not guaranteed, and home values can fall. This is not investment or tax advice.
The four ways, added up
- Cash flow
- Tax savings
- Appreciation
- Loan paydown
Show the numbers as a table
| Way | In all | Share |
|---|
Year by year: what it has built so far
- All four ways together, so far
Years from now
Show the numbers as a table
| Year | Home value | Loan left | Built so far |
|---|
What these numbers leave out
The long-run view counts all four ways a rental makes money. Some things that matter to owners are still not in it.
Selling costs
If you sell, the agent commission and closing costs come out of the home's value. They are not subtracted here.
Taxes when you sell
When you sell a rental, the depreciation you took is taxed, and the gain may be too. Rules on rental losses can also change your yearly tax. Your tax preparer can tell you how they apply to you.
Surprises
The long-run view assumes steady growth every year. A new roof, a long vacancy or a drop in home values can change the picture.
There is no "good" number here. Use these results to compare one property with another, or one set of choices with another, on the same terms. This is not investment or tax advice.
Is the rent the right rent?
Every number on this page starts with the rent. If it is set too low, every month earns less than it could. If it is set too high, empty days eat the difference.
Get a free rental analysis
Tell us where the rental is. Chuck Kelley, our Broker/Owner, will look at what it should rent for. No obligation. Or call 719.581.RENT.
Get a Free Rental AnalysisHow we figure it
- Yearly rent after vacancy: the monthly rent times 12, minus the vacancy percent of it.
- Management: the fee percent times the rent after vacancy, since the fee is a percent of rent collected.
- Repairs and upkeep: your number, or 8% of a full year's rent if you leave it blank.
- Yearly operating costs: management, plus property tax, insurance, repairs, HOA dues times 12, and other costs. Not the mortgage.
- Net operating income: rent after vacancy minus operating costs.
- Cap rate: net operating income divided by the property value.
- Cash flow: net operating income minus 12 mortgage payments. Per month is that divided by 12.
- Cash-on-cash return: a year of cash flow divided by the cash you have in it.
- Each rent dollar: each cost divided by a full year of rent, before vacancy.
- Mortgage payment, if you leave it blank: the monthly payment that pays off the loan balance at your rate over the years left.
How we figure the long run
- Each year: rent and the management fee grow at your rent growth rate, starting in year 2. Property tax, insurance, repairs, HOA dues and other costs grow at your cost growth rate. Vacancy stays the same percent.
- Cash flow: each year's rent after vacancy, minus that year's costs and mortgage payments, added up over the years.
- Appreciation: today's value grown at your home value growth rate for each year, minus today's value.
- Loan paydown: the principal part of each mortgage payment, month by month, added up. When the loan is paid off, the payments stop.
- Tax savings: depreciation is the building share of today's value divided by 27.5 years, for residential rental property (IRS Publication 527). It stops when the whole building share is used. Each year's depreciation times your tax rate is the tax it can shelter. Those are added up.
- Tax owed: in years when rent after costs is more than the mortgage interest plus depreciation, you would owe tax on the rental. That is not subtracted.
- The big number: the four added up. Each way's share is that way divided by the total. Shares show only when none of the four is below zero.
These are projections from the numbers you typed. Growth is not guaranteed, and home values can fall. This is not investment or tax advice.