Methodology & Accuracy

Every calculator on RealEstateCalculations.net is powered by a small, tested calculation engine. This page documents the formulas, the conventions we chose, and — just as importantly — the simplifications each model makes, so you can judge how far to trust a number.

The core definitions

• Effective rent = monthly rent × (1 − vacancy%). Vacancy is modeled as a steady haircut rather than discrete empty months.
• Net operating income (NOI) = (effective rent − operating expenses) × 12. Operating expenses exclude mortgage principal and interest by industry convention, so NOI describes the property independent of financing.
• Cap rate = NOI ÷ property value.
• Cash flow = effective rent − operating expenses − mortgage payment, monthly.
• Cash-on-cash return = annual cash flow ÷ cash invested, where cash invested = down payment + closing costs + initial rehab.
• Mortgage payment uses the standard amortized-loan (PMT) formula with monthly compounding; a 0% rate divides the principal evenly.
• Fix & flip max offer = rule% × after-repair value − rehab costs (70% by default). Projected profit = ARV − purchase − rehab − holding − selling costs.

Rent vs. buy: simulated, not formulaic

The rent-vs-buy comparison is simulated month by month. Renting accumulates rent, raised once a year by your rent-growth rate. Buying accumulates the down payment, every mortgage payment, and ownership costs (taken as an annual percentage of the home's value, which appreciates yearly) — then credits back the net sale proceeds at the end of the horizon: the appreciated price, less selling costs, less the remaining loan balance computed from the actual amortization. The lower net cost wins. This structure is why the horizon matters so much: transaction costs amortize over the stay while equity builds slowly at first.

What the models do not include

These are screening and planning tools, not underwriting engines. They do not model income taxes, depreciation deductions, appreciation on rentals, principal paydown as a return component, PMI, financing points, rent growth on investment properties, or market cycles. The rent-vs-buy model excludes the opportunity cost of the down payment and any tax treatment of mortgage interest. Each calculator's page states its own key omissions, and every page carries a "not financial advice" note. Treat the output as a way to understand a deal's shape, not as a guarantee.

Worked examples can't drift

The numbers in each page's explanation — every "clears $269 a month" — are computed at build time by the very same engine that runs the interactive calculator, not typed in by hand. If the calculation logic ever changed, the copy would change with it (or the build would fail), so the documentation cannot silently disagree with the tool.

Tested against reference figures

The engine is covered by automated tests that check it against independently computed reference values — for example, a $220,000 purchase at 20% down and 7% for 30 years producing a $1,170.93 payment, $269.07 monthly cash flow, 6.21% cash-on-cash, and a 7.85% cap rate. If you believe a result is wrong, that is exactly the kind of report we want: see the contact page, and confirmed issues are fixed in the engine and locked in with a new test.