Rental Property Returns and Income Tax Calculator

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Get 24/7 visibility into your portfolio’s performance with reports that are automatically generated and updated in real time. Create income statements, balance sheets, cash flow reports, collect rent, screen tenants and more, in just a couple clicks. Best of all, it’s free to get started.

Over 300,000 landlords use Stessa to get access to features like:

• Automated accounting tools
• Manual expense tracking
• One-click smart receipt scanning
• Mileage tracking
• Automated bank feeds
• Centralized dashboard with key metrics and complete chart history
• Rental applications
• Online rent collection and reminders
• Tenant screening
• Landlord banking
• eSigning for documents and leases
• Mobile app (iOS and Android)

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How The Calculator Works

1. Income & Vacancy

• • Annual Gross Rent = Monthly Rent × 12

  • Vacancy Deduction = (Gross Rent ÷ 365) × Vacancy Days

  • Net Rent = Gross Rent − Vacancy Deduction

2. Expenses

• • Property Tax Cost = Purchase Price × Property Tax Rate

  • Repairs & Maintenance Cost = Gross Rent × Repairs & Maintenance %

  • Management & Leasing Fees = Gross Rent × Mgmt Fee % + (Monthly Rent × Leasing Months)

  • Total Expenses = Sum of all annual expense items

3. Operating Metrics

• • NOI = Net Rent − Total Expenses

  • Cap Rate = (NO I ÷ Purchase Price) × 100

4. Financing Metrics

• • Computes a standard amortizing loan based on Down Payment, Interest Rate, and Amortization Term

  • First-Year Interest = sum of the interest portion of your first 12 payments

  • Principal Paydown = Annual Debt Service − First-Year Interest

  • Net Cash Flow = NOI − Annual Debt Service

  • Cash-on-Cash Return = (Net Cash Flow ÷ (Down Payment × Purchase Price)) × 100

5. Coverage & Tax

• • DSCR = NOI ÷ Annual Debt Service

  • Taxable Income = NOI − (Interest + Depreciation)

  • Income Taxes = Taxable Income × Marginal Tax Rate

  • After-Tax Return = NOI − Interest Payment − Income Tax

  • After-Tax Cash Flow = Net Cash Flow − Income Taxes

  • Cash-on-Cash After-Tax = (After-Tax Cash Flow ÷ (Down Payment × Purchase Price)) × 100

Understanding Each Input

Purchase Price ($) The total acquisition cost of your rental property, including both the property itself and any buyer-paid closing costs. This figure serves as the foundation for calculating potential returns, loan amounts, and depreciation benefits.

Down Payment (%) The percentage of Purchase Price you contribute upfront. This critical decision affects your loan amount, monthly payments, and investment leverage. A higher down payment typically secures better loan terms but reduces your cash-on-cash return potential.

Interest Rate (%) Annual mortgage interest rate. Even small rate differences significantly impact your monthly payments, cash flow, and long-term investment returns. This rate also determines your deductible interest expense.

Amortization (years) The period over which your loan is fully repaid. Longer terms reduce monthly payments and improve cash flow, while shorter terms build equity faster but reduce tax-deductible interest.

Monthly Rent ($) Expected monthly rental income your property will generate. As your primary revenue driver, accurate rent estimation is essential for realistic return projections and investment decision-making.

Annual Vacancy (days) Estimated days your property will sit unoccupied each year;. Conservative vacancy estimates protect against income overestimation and prepare you for inevitable tenant turnover periods.

Property Tax Rate (%) Annual property tax as a percentage of Purchase Price. This significant expense varies by location and must be carefully researched, as it directly impacts your ongoing operating costs.

Annual Insurance ($) Yearly premium for property and liability coverage. Investment properties typically require specialized landlord policies that cost more than standard homeowner insurance.

Repairs & Maintenance (%) Annual reserve allocation for property upkeep as a percentage of gross rent. Setting adequate maintenance reserves prevents unexpected cash flow disruptions and property deterioration.

Leasing Fee (months) Cost to find and secure qualified tenants, expressed in months of rent. This recurring expense impacts your returns whenever tenant turnover occurs.

Property Management Fee (%) Professional management cost as a percentage of gross rent. Even if self-managing initially, including this expense provides a more accurate long-term investment analysis.

Land Value (% of purchase) Non-depreciable portion of your investment. This allocation directly affects your depreciation tax benefits, as only the building portion qualifies for depreciation deductions.

Marginal Tax Rate (%) Your highest federal income tax bracket. Your specific tax rate determines the value of rental property tax advantages and significantly impacts your true after-tax investment returns.

Frequently Asked Questions

What is Net Operating Income (NOI)?

NOI represents your property’s profitability before considering financing costs and taxes. It’s calculated as Net Rent minus Total Expenses and serves as a fundamental metric for comparing investment properties regardless of their financing structures. A higher NOI indicates stronger property performance.

How does this calculator handle depreciation for tax purposes?

Depreciation is calculated using the straight-line method over 27.5 years for residential property. Only the building portion (Purchase Price minus Land Value) can be depreciated. This significant tax deduction reduces your taxable income.

What is Cash-on-Cash Return vs. After-Tax Cash-on-Cash Return?

Cash-on-Cash Return shows your pre-tax yield, while After-Tax Cash-on-Cash accounts for income tax impacts. The After-Tax figure gives you a more accurate picture of what you’ll actually keep in your pocket.

What does DSCR tell me?

The Debt Service Coverage Ratio (DSCR) indicates how well your property’s income covers your debt payments. Calculated as NOI divided by Annual Debt Service, it’s a critical metric that lenders use to assess mortgage approval. A DSCR of 1.0 means you’re just breaking even, while 1.2 or higher typically satisfies lenders and provides a safety margin for unexpected expenses or vacancies.

What tax benefits does rental property offer?

Besides depreciation, you can deduct mortgage interest, property taxes, insurance, maintenance, property management fees, and other operating expenses. Your specific tax situation may vary, so consult a tax professional.