Frequently Asked Questions
What is cash-on-cash return?
Annual pre-tax cash flow divided by total cash invested (down payment, closing, initial repairs). It measures the return on actual cash deployed, not on the property's full value. Many investors target 8-12% cash-on-cash.
What is the 1% rule?
A quick screen: monthly rent should equal at least 1% of purchase price. A $200,000 property should rent for $2,000/month. The rule is hard to find in most coastal markets in 2025; midwestern markets still produce 1%+ deals.
How do I account for vacancy and maintenance?
Standard assumptions: 5-10% vacancy, 1-2% of property value annually for maintenance, 8-10% of rent for property management. Skipping these makes projections look 30-40% better than reality.
What tax benefits do rentals offer?
Depreciation deduction (residential: 27.5 years straight-line), mortgage interest deduction, expense write-offs, and potential 1031 exchange to defer gains on sale. Depreciation recapture at 25% applies on sale unless rolled forward.
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This calculator provides estimates for educational purposes only and is not investment advice. Past performance does not guarantee future results. Consult with a qualified financial advisor before making investment decisions. All investments carry risk, including potential loss of principal.