Five Quick-Check Calculators for Sizing Up a Rental

Before I run a full month-by-month analysis on any building, I put it through a handful of ten-second screens. They are rules of thumb, and every one of them lies in a specific way, but together they kill bad deals fast and flag the ones worth an hour of homework. I built a free calculator for each of the five I actually use. Each one takes two or three inputs, works on a phone, and tells you what the result means instead of just printing a number.

The 1% rule: the first filter

Monthly rent divided by purchase price. At 1% or better, positive cash flow is usually possible; far below it, almost never. This is the screen that explains why a $120,000 duplex renting for $1,400 works while a $550,000 house renting for $2,200 does not. Where it lies: it ignores taxes and insurance, which vary enormously by state, and it ignores the owner-occupied case — a house hack judged against your current rent can make sense below 1%. Run yours in the 1% rule calculator.

The 50% rule: the expense reality check

Over a long hold, roughly half of gross rent goes to operating costs before the mortgage: taxes, insurance, repairs, vacancy, turnover. New landlords budget 20% and get educated by a furnace. The 50% rule calculator subtracts the assumed costs and your principal-and-interest payment and shows what is likely left. Where it lies: brand-new buildings run cheaper than 50%, hundred-year-old ones in snow country can run worse.

Cap rate: the price-to-income yardstick

Annual net operating income divided by price — the return the building itself produces, before financing. It is how you compare a $120,000 duplex in Cleveland against a $300,000 one in Denver on equal footing. The cap rate calculator computes NOI from rent and expenses and reads the result against the typical 5–8% range for small residential rentals. Where it lies: it says nothing about your loan, and a seller’s “pro forma” expense numbers are usually optimistic.

Cash-on-cash: what your money actually earns

Annual pre-tax cash flow divided by the cash you put in. Because leverage concentrates returns, this is the number to compare against index funds — and the one that goes negative first when a deal is thin. The cash-on-cash calculator does the division and the interpretation; the worked example from my own building shows the full arithmetic behind it.

The 70% rule: for rehabs and BRRRR deals

Pay at most 70% of after-repair value, minus the repair budget. The 30% margin covers financing, holding, selling costs, and profit — spend it on the purchase price and the project earns nothing. The 70% rule calculator sets the ceiling; if you are refinancing to stay in, follow it with the BRRRR calculator to check how much cash the refi returns.

How to use them together

Screen with the 1% rule, sanity-check expenses with the 50% rule, compare price to income with cap rate, and judge the return on your actual cash with cash-on-cash — the 70% rule only enters when there is a rehab. Any deal that survives all four screens earns the full treatment: the house hacking calculator for owner-occupied buildings, and the 6-step checklist for everything else. The screens are for saying no quickly; say yes slowly.