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Rental Property Calculator

Calculate rental yield, cash flow, and cap rate to evaluate your investment.

Total cost to acquire the property
Gross monthly rent before expenses
Property maintenance, taxes, insurance, utilities

Investment Analysis

Enter your property details to calculate metrics.

Understanding Real Estate Investment Analysis

Rental property investment is one of the most popular wealth-building strategies. However, high property prices don't always guarantee good returns. This calculator helps investors evaluate whether a property will generate sufficient cash flow and returns to justify the investment.

Cash Flow Focus

Monthly cash flow tells you how much money the property puts in your pocket each month. Positive cash flow properties generate income immediately and can support your lifestyle.

Yield Analysis

Rental yield shows the annual return as a percentage of property price. Compare with fixed deposits, bonds, and stock market returns to evaluate if real estate is your best investment option.

Cap Rate Insight

Capitalization Rate (Cap Rate) is the truest measure of property profitability as it accounts for operating expenses. Use Cap Rate to compare different properties on equal terms.

Appreciation Potential

Long-term real estate value typically appreciates 6-10% annually in good locations. Combined with positive cash flow, this creates powerful wealth-building potential over 10-20 years.

Key Investment Metrics Explained

1. Monthly Cash Flow

Formula: Monthly Cash Flow = Monthly Rent - Monthly Expenses

This is the simplest metric—how much money the property generates each month. Positive cash flow means the property pays for itself and adds money to your pocket. Negative cash flow means you must contribute from personal funds.

Example: Property generating ₹50,000 rent with ₹15,000 expenses has ₹35,000 monthly cash flow.
2. Gross Rental Yield

Formula: Gross Yield = (Annual Rental Income ÷ Property Price) × 100

Rental yield expresses annual income as a percentage of property cost. It doesn't account for expenses, so it's called "gross yield." In India, typical residential yields are 2-4% in metros and 4-6% in tier-2/3 cities.

Example: ₹50 lakh property generating ₹6 lakh annual rent (₹50k/month) = 12% gross yield.
3. Net Rental Yield / Capitalization Rate (Cap Rate)

Formula: Cap Rate = (Annual Net Income ÷ Property Price) × 100
Annual Net Income = Annual Rent - Annual Expenses

Cap Rate is more accurate than gross yield because it accounts for operating expenses. It shows the true annual return you can expect from the property. Generally, 6-12% cap rate is considered good for residential properties, 8-15% for commercial.

Example: ₹50 lakh property with ₹6 lakh annual rent and ₹2 lakh annual expenses = (₹4 lakh ÷ ₹50 lakh) × 100 = 8% Cap Rate.

Typical Rental Yields by Location & Property Type

Property Type Metro Cities Tier-2 Cities Tier-3 Cities Investment Outlook
Residential Apartment 2-3% 4-5% 5-7% Steady tenants, stable value
Residential Villa 2-3% 3.5-5% 4-6% Higher appreciation potential
Commercial Shop/Office 5-8% 6-9% 7-10% Higher yields, business risk
Co-Living/Shared Spaces 6-10% 7-11% 8-12% Highest yields, higher management
Fixed Deposit/Bond 6-7% (Safe, Liquid) Benchmark for comparison

Note: Yields vary by micro-location, property condition, and current demand. Always research local rental market before investing.

What to Include in Monthly Expenses

✅ Include These Costs:
  • Maintenance & Repairs - Paint, plumbing, electrical (1-2% of property value annually)
  • Property Taxes - Annual property tax by municipality
  • Insurance - Landlord/property insurance premium
  • Society Maintenance - Monthly HOA/apartment society charges
  • Utilities (if paid by owner) - Water, electricity, common area maintenance
  • Vacancy Reserve - Buffer for periods without tenant
  • Tenant Acquisition - Advertising, broker fees
❌ Don't Include These:
  • Loan EMI - Analyze separately; use cap rate without EMI
  • Income Tax - Tax on rental income; personal tax situation
  • One-Time Renovations - Major overhaul; not recurring monthly
  • Tenant Security Deposit - You return it; not an expense
  • Down Payment/Closing Costs - Already in property price
  • Appreciation/Depreciation - Speculative, not cash expense
  • Personal Expenses - Unrelated to property operation

Real Estate Investment Scenarios

Scenario Property Price Monthly Rent Monthly Expenses Gross Yield Cap Rate Verdict
High Yield (Good Deal) ₹30 lakh ₹40,000 ₹10,000 16% 12% ✅ Excellent
Decent Yield (Fair Deal) ₹50 lakh ₹35,000 ₹10,000 8.4% 6% ℹ️ Fair
Low Yield (Appreciation Play) ₹80 lakh ₹30,000 ₹8,000 4.5% 3.3% ⚠️ Need Appreciation
Negative Cash Flow ₹90 lakh ₹25,000 ₹30,000 3.3% -0.7% ❌ Loss

Frequently Asked Questions

Rental Yield is the annual return on a property investment expressed as a percentage of the property's purchase price. Formula: Rental Yield = (Annual Rental Income ÷ Property Price) × 100. For example, a property costing ₹50 lakh generating ₹5 lakh annual rent has a 10% rental yield. Note: This is gross yield and doesn't account for expenses.

Cap Rate is a more accurate measure of real estate returns as it considers property operating expenses. Formula: Cap Rate = (Net Annual Income ÷ Property Price) × 100. A property generating 10% gross yield but with high expenses might have only 5% cap rate. Cap Rate helps investors compare different properties and markets. Generally, 6-12% cap rate is considered good for residential properties.

Monthly property expenses include: Property maintenance and repairs (1-2% of property value annually), Property taxes, Municipal taxes/civic charges, Annual maintenance/society charges, Insurance (home/landlord insurance), Utilities you pay (if applicable), Marketing costs for tenant acquisition, Vacancy allowance (reserve for empty periods). Don't include: Loan EMI (considered separately in ROI), Income tax on rental income, One-time renovation costs.

In India, typical rental yields vary by location and property type: Residential properties: 2-4% gross yield in metro cities, 4-6% in tier-2/3 cities. Commercial properties: 5-8% gross yield. Co-living/shared spaces: 6-10% gross yield. Compare rental yield with fixed deposit rates (currently 6-7%) and inflation rate (4-6%). If rental yield is lower, the investment relies on property appreciation.

Cash-on-Cash Return measures actual cash returns against your down payment (not total property price). Formula: Cash-on-Cash Return = (Annual Net Cash Flow ÷ Initial Cash Investment) × 100. Example: If you invest ₹10 lakh down payment and the property generates ₹2 lakh annual net cash flow, your Cash-on-Cash Return is 20%. This is different from Cap Rate which divides by total property price.

Positive Cash Flow: Monthly rent exceeds all expenses. Money flows into your pocket each month. This is ideal for income-focused investors. Negative Cash Flow: Monthly expenses exceed rent. You pay from personal funds each month. This is acceptable if the property is appreciating rapidly, but requires sufficient personal cash reserves. Most investors prefer positive or neutral cash flow properties.

Loan EMI affects your actual cash flow but not Cap Rate calculations. For yield/cap rate analysis, use gross property price and rental income. For personal cash flow (whether you make money monthly), subtract EMI from net cash flow: Personal Monthly Cash Flow = (Rent - Expenses - Loan EMI). Many properties with positive cap rate show negative personal cash flow initially but become positive after loan repayment.

Key profitability factors: (1) Rental Income - increases with inflation (2-3% annually), (2) Operating Expenses - grow slower than income (maintenance costs compound), (3) Property Value Appreciation - historically 6-10% annually in good locations, (4) Loan Payoff - as you pay down the loan, cash flow improves, (5) Tax Benefits - property depreciation, interest, and maintenance are tax-deductible. Long-term rental properties are typically profitable due to combination of cash flow and appreciation.
Quick Tips
  • Compare rental yield with FD rates (6-7%) before investing.
  • Budget 25-40% of rent for property expenses and maintenance.
  • Use Cap Rate (not gross yield) to compare properties accurately.
  • Target positive cash flow for immediate income generation.
  • Research location: rental demand and growth potential matter.
  • Account for loan EMI separately from operating expenses.
Disclaimer
This calculator provides estimates for educational purposes. Actual returns vary by location, property condition, and market factors. Always consult with financial advisors and real estate professionals before making investment decisions.
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