What is rental profit?
Rental profit is the monthly or annual income remaining after deducting all expenses (mortgage, taxes, insurance, maintenance) from rental income. The effective rent accounts for vacancies.
What is a good cash-on-cash return on rental property?
Cash-on-cash returns of 8% to 12% annually are generally considered good, while 6% or less is typically underwhelming for rental property investments.
How does vacancy rate affect rental profit?
Vacancy rate reduces your effective rental income. A 5% vacancy rate means you assume 5% of annual rent will be lost to unoccupied periods, lowering your actual profit.
Should I include all property expenses in the calculator?
Include mortgage, property tax, insurance, and maintenance. Don't include utilities if tenants pay them, or HOA fees unless they apply to your property.
Can rental profit be negative?
Yes. If your monthly expenses exceed rental income after accounting for vacancy, you'll have negative cash flow (a loss) rather than profit.