What these models leave out

Every calculator on this site is a screening model. It takes the inputs you enter, applies one stated formula or one stated simulation, and returns a number. It does not estimate anything you did not type. The engine applies one non-zero default, the flip rule percentage; the fix-and-flip and rehab-budget forms also prefill a selling-cost and a contingency placeholder when those fields are left blank — each is shown on its tool and can be changed. Nothing reaches into taxes, lending, or the market to fill a gap. The methodology page lists what is left out in its “What the models do not include” section; this guide walks that list calculator by calculator, with the formulas running beside each omission, and ends with how to read a result that lands close to a line. Every example below uses illustrative values entered for the example; none is a market figure. The other guides explain what each tool does compute.

Screening, not underwriting

A screen answers a narrow question: given these inputs, what does this formula produce? Underwriting answers a broader one — whether to proceed with a deal — and that needs a tax position, lender terms, local knowledge, and judgment about the future. None of those are inputs here, so none can be in the output. A result from these tools describes the inputs; it is not a verdict on the property. The 1% rule and the 70% rule are presented as the conventions they are: screens that say “look closer” or “not on this screen,” never “buy” or “pass.”

The rental tools: a pre-tax, single-year snapshot

The rental property, cap rate, and cash-on-cash calculators share one engine and one frame: a single year of operation, before tax, at the rent and expenses you enter. The reference property: $220,000 bought with $44,000 down at 7% over 30 years, renting for $2,200 with a 5% vacancy allowance and $650 of monthly operating expenses, plus $5,000 of closing costs and $3,000 of initial rehab. The engine returns a $1,170.93 payment, $2,090.00 of effective rent, and $269.07 of monthly cash flow — $3,228.81 a year, which is 6.21% of the $52,000 invested — alongside $17,280 of NOI and a 7.85% cap rate.

Income taxes and depreciation. The $3,228.81 is the complete output. Nothing is subtracted for income tax and nothing is added for a depreciation deduction, because neither is an input. Whatever your tax situation does to that figure happens outside the model.

Appreciation and principal paydown. The annual figure is the monthly cash flow times twelve. The property's value never changes, and the full $1,170.93 payment is subtracted every month as a cost: the engine does not split it into interest and principal, and it does not credit the principal portion back as equity or return. Cash-on-cash is annual cash flow ÷ cash invested, nothing more.

Rent growth and market cycles. The rent you enter is the rent for every month. There is no growth rate, no vacancy event, and no second year — the output is one steady year. The rent-vs-buy simulation raises rent annually because its question spans a horizon; the rental tools' question is this year's cash economics.

One omission is a convention: cap rate ignores financing on purpose. Change the down payment on the reference property to $88,000 and the payment falls to $878.20, monthly cash flow rises to $561.80, and cash-on-cash moves to 7.02% — but the cap rate is 7.85% in both cases, because NOI is (effective rent − operating expenses) × 12 and never sees the loan. The cap-rate calculator does not even ask for one: the same rent, vacancy, expenses, and value entered there return 7.85%. Operating expenses must therefore exclude the mortgage payment; entering it there subtracts it twice in cash flow and pulls NOI and the cap rate down. The NOI and cap rate guide and the cash flow guide cover both measures.

Financing: the payment is PMT and nothing else

Every loan on this site is the standard amortized payment with monthly compounding on the amount financed (price minus down payment), at the rate and term entered; a 0% rate divides the principal evenly. The methodology lists PMI and financing points as not modeled, and the formula shows why: mortgage insurance and points, where a lender applies them, have no input here; the payment is principal and interest only. Put $22,000 down on the same $220,000 property instead of $44,000 and the engine prices a $198,000 loan at $1,317.30 a month and 4.91% cash-on-cash on $30,000 invested — the same formula on a larger loan, with nothing added to it. At 0% the formula does nothing hidden: a $180,000 purchase with $60,000 down at 0% for 10 years is a $120,000 loan over 120 months, and the engine returns exactly $1,000.00, the loan divided by the months.

The screens: the 1% rule and GRM

The 1% rule calculator compares monthly rent to purchase price, and the gross rent multiplier calculator divides price by gross annual rent. Neither takes vacancy, expenses, or financing, so neither can be a verdict. The 1% rule is a hard threshold with no notion of “close.” On a $250,000 property the target rent is $2,500; rent of $2,500 is 1% of the price and passes, while $2,490 is 0.996% and does not. $10 of rent separates the two outcomes, and nothing in the screen says which side is right.

The screen also cannot see expenses. Run the passing property through the rental calculator twice with $50,000 down at 7% over 30 years and a 5% vacancy allowance: with $600 of monthly operating expenses the cash flow is $444.40 a month and the cap rate 8.52%; with $1,100 it is −$55.60 and 6.12%. The 1% screen returned the same pass for both, because it never asked. GRM has the same blind spot in a different shape: a $300,000 listing renting for $2,500 a month is $30,000 of gross annual rent and a multiplier of 10 — 120 months of rent to equal the price — and vacancy and operating expenses never enter the ratio. The 1% rule and GRM guide covers both screens.

Fix and flip: a convention and a subtraction

The fix and flip calculator computes two independent numbers. The maximum offer is rule% × after-repair value − rehab costs, where the rule percentage is a convention you can change; the engine's default is 70%. Projected profit is ARV − purchase − rehab − holding − selling costs, using the purchase price you actually entered. With a $400,000 ARV, $50,000 of rehab, a $230,000 purchase, $10,000 of holding costs, and selling costs of 6% of ARV ($24,000), the default rule puts the maximum offer at $230,000 and the projected profit at $86,000 — a 27.39% return on the $314,000 total outlay. The rule is a convention, not an omission: lower it to 65% and the maximum offer becomes $210,000 while the profit line does not move, because it never used the rule.

What the model leaves out is everything with a time dimension or a tax dimension. Holding costs are a single figure you enter; the engine has no months and no loan on the project, so if the work runs long nothing changes unless you change that figure — enter $20,000 instead and the profit falls to $76,000, exactly the $10,000 difference. Income tax on the profit and any market movement between purchase and sale are outside the model entirely; the ARV is the sale price, as entered. The 70% rule guide works through the formula on more inputs.

Rehab budget: arithmetic on your prices

The rehab budget calculator supplies no cost data of its own. It totals the material and labor figures you enter per line, applies your contingency percentage to the subtotal, and divides by floor area if you give one. Entered as 4 lines — a kitchen line at $6,000 of materials and $4,500 of labor, a bathroom line at $3,000 and $2,500, a flooring line at $4,000 and $2,000, and an interior paint line at $800 and $1,200 — the budget sums to $13,800 of materials and $10,200 of labor, a $24,000 subtotal; a 10% contingency adds $2,400 for a $26,400 total, or $22.00 per square foot across 1,200 square feet. It leaves out every price, every scope decision, and the schedule: it cannot say what a kitchen costs, only what your kitchen line adds up to.

Rent vs. buy: what the simulation excludes

The rent vs. buy calculator models appreciation, rent growth, and equity because its question spans years. It excludes, as the methodology states, the opportunity cost of the down payment, any tax treatment of mortgage interest, and PMI, and it counts purchase closing costs only when you enter them. The reference inputs: $2,000 rent growing 3% a year against a $350,000 home with $70,000 down at 7% over 30 years, ownership costs of 2% of value per year, 3% appreciation, 6% selling costs, a 7-year stay, and purchase closing costs left at zero. Renting totals $183,899; buying nets to $130,701 after $149,416 of sale proceeds come back — buying cheaper by $53,198.

The down payment is cash out, once. The $70,000 enters the cost of buying as a single outlay at purchase. The model charges nothing for what that cash might have earned elsewhere over the stay, and credits nothing for it either.

Closing costs are yours to enter. Enter 2% of the price and the engine adds $7,000 to the cost of buying — the total moves from $130,701 to $137,701, exactly that amount, and nothing else changes. Leave the field blank and the figure is zero, not a guess.

Rent growth and appreciation are inputs, not forecasts. Rent is raised once a year by the rate you enter: one year of renting costs $24,000, and two years cost $48,720 rather than $48,000, because the second year runs at the raised rent. Set appreciation to 0% and the sale proceeds at 7 years become $73,787 and the comparison becomes renting cheaper by $17,793.

The horizon drives the result. The same inputs held 3 years give buying cheaper by $4,154; 7 years, buying cheaper by $53,198; 15 years, buying cheaper by $216,188. Nothing about the home changed between those runs — only the horizon: how many months the up-front and selling costs are spread over, how many annual rent increases and appreciation steps have occurred, and how far the loan balance has fallen. The simulation guide covers the mechanics.

How to read a borderline result

The omissions matter most when a result lands close to a line, because the factors the model leaves out are exactly the ones that could move it either way — and the model cannot say which. A $300,000 rental with $60,000 down at 7% over 30 years, renting for $2,500 with a 5% vacancy allowance, $775 of monthly operating expenses, and $6,000 of closing costs returns a monthly cash flow of $3.27 — within a few dollars of zero on a $1,596.73 payment — with a 6.4% cap rate and 0.06% cash-on-cash. That output is accurate for those inputs and says almost nothing on its own: a small change to the expense estimate or the vacancy allowance would flip the sign, and taxes, principal paydown, and appreciation — none of them modeled — would each change what the figure means to a particular owner. The same applies to the 1% screen's $2,490 near-miss and to a small rent-vs-buy difference. Three reading rules follow from the mechanics:

• A borderline result is a prompt to re-examine the inputs — especially the operating expenses and the vacancy allowance — not a verdict to act on.
• An omitted factor cannot be added back through an input it does not correspond to; a model with no tax input does not become tax-aware by lowering the rent.
• The direction and size of what is omitted depend on circumstances the model does not know; this guide names the omissions and does not estimate them.

Frequently asked questions

Not financial advice: this guide describes what the calculators on this site model and what they leave out; it is a general educational explanation, not an analysis of any property. 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 are processed locally in your browser and never transmitted. See the methodology page.