Guides

A calculator on this site answers one question with one number. Enter a $220,000 property with $44,000 down at 7% over 30 years, $2,200 of monthly rent with a 5% vacancy allowance, $650 of monthly operating expenses, $5,000 of closing costs, and a $3,000 initial rehab into the Rental Property Calculator and it reports a $1,170.93 payment, $269.07 of monthly cash flow, a 6.21% cash-on-cash return, and a 7.85% cap rate. What it cannot say is which definition produced each number, which inputs move it, or what it leaves out. The guides fill that gap: each explains one definition the calculators apply, runs it on inputs the sentence names, marks where the model stops, and says how to read the result.

Every figure in the guides, like every figure on this page, is computed at build time by the same tested engine that runs the calculators, so the explanation cannot drift from the tool. And every model is a screen, not a verdict: it reports arithmetic on the values you enter and compares the result to no benchmark, target, or market. The formulas are set out on the methodology page; the guides sit one layer above it.

NOI and cap rate, explained

Effective rent is monthly rent times (1 − vacancy%); net operating income is effective rent less operating expenses, times twelve; cap rate is NOI divided by value. On the reference property — $2,200 of rent, 5% vacancy, $650 of monthly expenses, a $220,000 value — NOI is $17,280 and the cap rate is 7.85%. The guide walks the chain one step at a time, shows why the mortgage is not an operating expense, and moves the vacancy allowance from 0% (cap rate 8.45%) to 10% (7.25%) to show how a haircut on rent reaches every downstream figure at once, then lists what the ratio omits.

Cash flow and cash-on-cash return

Monthly cash flow is effective rent less operating expenses less the mortgage payment; cash invested is down payment plus closing costs plus initial rehab; cash-on-cash return is annual cash flow divided by cash invested. The payment is the standard amortized-loan (PMT) formula with monthly compounding; a 0% rate divides the principal evenly. The guide shows why financing moves one ratio and not the other: pay the reference property's full $220,000 in cash instead of $44,000 down and the payment becomes $0.00, monthly cash flow rises to $1,440.00, and cash-on-cash moves from 6.21% on $52,000 invested to 7.58% on $228,000, while the cap rate stays at 7.85% because the loan never enters its formula.

The 1% rule and GRM as screens

The 1% rule compares monthly rent to one percent of the price; the gross rent multiplier divides the price by gross annual rent. Both look only at price and scheduled rent — no vacancy, expenses, or financing — which is why they are screens, not verdicts. At $220,000 and $2,200 the rent is 1% of the price and the screen passes; the GRM on the same pair is 8.33, or 100 months of gross rent. At $300,000 and $2,500 the rent is 0.83% of the price, the screen does not pass, and the GRM is 10. The guide shows the two are one ratio read in opposite directions and lists what neither can see.

The 70% rule for flips

Maximum offer is rule% × after-repair value − rehab costs; projected profit is ARV − purchase − rehab − holding − selling costs. With a $300,000 ARV, a $40,000 rehab budget, a $160,000 purchase price, $8,000 of holding costs, and selling costs entered as 6% of ARV, the engine's default 70% rule gives a $170,000 maximum offer and a projected profit of $74,000 on $226,000 invested. The percentage is a convention, not a law: enter 65% and the maximum offer falls to $155,000 while projected profit stays at $74,000, because profit is netted from the price you actually enter. The guide covers each input and what the screen does not model.

Rent vs. buy: how the simulation works

This calculator has no single formula. It loops month by month over the years you plan to stay, adding up rent on one side (raised once a year) and, on the other, the down payment, any purchase closing costs you enter, every mortgage payment, and ownership costs on the appreciating value, then crediting back the net sale proceeds after selling costs and the remaining loan balance. The lower net cost wins. On the calculator page's example — $2,000 of rent against a $350,000 home with $70,000 down at 7% over 30 years, with 3% rent growth, 2% ownership costs, 3% appreciation, and 6% selling costs, all illustrative entries — buying is cheaper by $53,198 over 7 years, by $4,154 over 3 years, and $2,846 dearer than renting over 3 years once purchase closing costs of 2% of the price ($7,000) are entered. The guide explains why the horizon drives the result and what the simulation excludes.

What these models leave out

Every tool here is a screening model, and its omissions are stated, not approximated: income taxes, depreciation deductions, appreciation on rentals, principal paydown as a return component, PMI, financing points, rent growth on investment properties, and market cycles are not modeled, and the rent-vs-buy model also excludes the opportunity cost of the down payment and any tax treatment of mortgage interest. The absence is literal: the rental result carries 8 figures — payment, effective rent, monthly and annual cash flow, NOI, cash invested, cash-on-cash, and cap rate — and no field for any omitted factor. The guide sets what each calculator computes beside what it does not.

Back to the calculators

The calculators the guides explain: the Rental Property Calculator, Cap Rate Calculator, Cash-on-Cash Return Calculator, 1% Rule Calculator, Gross Rent Multiplier Calculator, Fix and Flip Calculator, Rehab Budget Calculator, and Rent vs. Buy Calculator. The methodology page sets out every formula and omission in one place, and the about page explains the scope the site keeps to.

Not financial advice: these guides are general educational explanations of how the calculators on this site compute their results, not analyses of any property or recommendations to buy, sell, rent, or flip. Real deals involve taxes, appreciation, financing terms, and local factors these models exclude — verify any deal with your own due diligence and qualified professionals. Values entered in the calculators are processed locally in your browser and never transmitted. See the methodology page.