Mortgage Profit Calculator

A rental property bought with a mortgage has two returns: the rent collected each month and the wealth built by sale day. This calculator models both. Enter the purchase, loan, rent and expenses, and get year-1 cash flow, NOI, cap rate, cash-on-cash, DSCR and break-even occupancy, then the full holding-period picture: rent growth, loan paydown, appreciation, selling costs, depreciation-adjusted capital gains tax, and after-tax profit. This is the investor’s deal view: it measures the property investor’s profit on a mortgaged rental, not a lender’s profit margin on a loan. The borrower’s settlement-cash view lives on the companion mortgage proceeds calculator.

Quick Answer

How to use the mortgage profit calculator

Enter the purchase and financing first: price, down payment, and the loan amount (leave it blank and it auto-fills as price minus down), plus closing and renovation costs, rate and term. Then the rental income block: monthly rent, annual rent growth, and vacancy. Then annual operating expenses: taxes, insurance, maintenance, and management as a percent of rent. Finish with the sale assumptions: holding period, appreciation, selling costs, the flat capital gains rate, and depreciation years. Press Calculate for the year-1 and holding-period report. Results stay hidden until you calculate, and Reset restores the worked example.

The formulas behind the card

Monthly payment uses the standard amortization formula: loan x (r(1+r)^n) / ((1+r)^n – 1), with r the monthly rate and n the payment count. NOI = effective annual rent minus operating expenses (taxes, insurance, maintenance, management); the mortgage is excluded. Cap rate = NOI / price x 100. Cash-on-cash = annual cash flow / cash invested x 100, where cash invested = down payment + closing + renovation. DSCR = NOI / annual debt service. Break-even occupancy = (full-occupancy operating expenses + debt service) / gross annual rent x 100.

The holding-period model compounds rent yearly from year 2, sums each year’s cash flow, and values the property at price x (1 + appreciation)^years. The remaining balance uses the amortization balance formula after hold x 12 payments, capped at the loan term. The taxable gain is sale price minus the depreciation-reduced basis minus selling costs, floored at zero, taxed at your flat rate. Total profit = total rental cash flow + after-tax sale proceeds minus cash invested; the annualized figure is the geometric rate.

Worked example: the $162,232 deal, checked line by line

$300,000 property, 20% down: price $300,000, down $60,000, loan auto-fills to $240,000 at 6.5% over 30 years, for a monthly payment of $1,516.96. Rent $2,600 with 5% vacancy gives $2,470 effective rent; annual operating expenses are $3,600 taxes + $1,800 insurance + $2,400 maintenance + 8% management ($2,371.20) = $10,171.20. Year-1 NOI = $19,468.80, cap rate 6.49%, annual cash flow $1,265 ($105.44/month), cash-on-cash 1.66%, DSCR 1.07. The 1% rule fails: $2,600 is 0.87% of $300,000.

10-year hold: with 3% annual rent growth, total rental cash flow over 10 years is $52,571; at 4% appreciation the property sells for $444,073, the remaining balance is $203,463, and after 6% selling costs and 15% capital gains tax the after-tax sale proceeds are $185,661. Total profit = $52,571 + $185,661 – $76,000 = $162,232, a 213.5% total ROI, about 12.10% annualized. Every figure above reproduces in the calculator.

What each metric actually tells you

NOI is the property’s earnings before financing: effective rent minus operating expenses. It lets you compare properties without the loan distorting the picture. Cap rate (NOI divided by price) is the unleveraged yield; 5 to 10% is the typical range investors quote, varying by market. Cash-on-cash divides annual cash flow by the cash you actually invested, so it reflects leverage: the worked example shows 6.49% cap rate against 1.66% cash-on-cash, because the mortgage eats most of the NOI. The dedicated cap rate calculator isolates the unleveraged yield for financing-blind comparisons.

DSCR (NOI divided by annual debt service) is the lender’s lens: under 1.0 means the rent does not cover the mortgage, and most lenders want 1.2 or better. The worked example’s 1.07 is lendable but tight. Break-even occupancy answers how full the unit must stay: 91.3% on the example, and over 100% means even full occupancy does not cover costs. For the rent side alone, the net rental income calculator models monthly income and expenses without the financing layer.

The quick screens: 1% rule, 50% rule, 70% rule

Before running full numbers, investors use rules of thumb. The 1% rule says monthly rent should be at least 1% of the purchase price ($3,000 on a $300,000 property); the calculator checks it on every run and the worked example fails it at 0.87%. The 50% rule estimates operating expenses at half of gross rent, a fast sanity check on your expense inputs. The 70% rule is for flippers: pay no more than 70% of after-repair value minus repairs. If you are still shopping, the buying rental property calculator frames the purchase decision, and the multifamily mortgage calculator handles multi-unit financing.

Why the holding-period model matters

The worked example earns most of its return at sale, not from rent, which is exactly what “cash-flow positive, thin return” warns you about. If the holding period runs past the loan term, the remaining balance clamps to zero instead of going negative. Depreciation keeps accruing straight-line across the whole hold, which is a simplification worth knowing; see the next section.

Depreciation and capital gains, simplified

The tool assumes the building (not the land) is 80% of the purchase price and depreciates it straight-line over the years you enter (27.5 for U.S. residential). Depreciation lowers your cost basis, which raises the taxable gain at sale: gain = sale price – (basis – depreciation taken) – selling costs, floored at zero, taxed at your flat rate. On the worked example that is $188,702 of gain and $28,305 of tax at 15%.

Three simplifications to know: the 80% building share is a fixed assumption, not your cost segregation study; depreciation keeps accruing even past the depreciation years if your hold is longer; and real U.S. tax splits the gain into depreciation recapture (taxed up to 25%) and long-term capital gains, instead of one flat rate. The IRS details are in Publication 527 (residential rental property), Publication 946 (depreciation), and Publication 544 (sales and other dispositions).

What competing calculators miss

Rental ROI tools fall into three camps, and each leaves something on the table:

• Year-1 only calculators: solid NOI, cap rate, cash-on-cash and DSCR math, but they stop at year one. A deal that looks thin in year 1 can be excellent over ten years, and a fine-looking year 1 can be a loss after taxes and selling costs. Neither answers the hold.
• First-year “total ROI” pages: add principal paydown and appreciation to year one, mixing a sale you have not made with cash flow you have. A one-year snapshot, not a holding-period model.
• Guides with worked examples: some get the arithmetic right; at least one published guide divides NOI by the mortgage balance instead of the cash invested, mislabeling the return entirely.
• The gap this page fills: year-1 metrics AND the full holding period in one card: rent growth from year 2, amortization-driven loan paydown, appreciation, selling costs, depreciation-adjusted capital gains at a rate you choose, DSCR and break-even screens, and a four-way verdict that calls speculation by its name. Every number in the worked example reproduces in the tool.

Frequently asked questions

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