Mortgage Profit Calculator

See whether a mortgaged rental property actually makes money, year one and at sale. Enter the purchase, loan, rent, and expenses, and this tool computes your monthly payment, cash flow, NOI, cap rate, cash-on-cash return, and DSCR, then models the full holding period: rent growth, loan paydown, appreciation, selling costs, depreciation-adjusted capital gains, and after-tax profit.

Worked example, checked against this exact tool

$300,000 property, 20% down: price $300,000, down $60,000, loan auto-fills to $240,000 at 6.5% over 30 years. Monthly payment = $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 = $29,640 – $10,171.20 = $19,468.80. Cap rate = $19,468.80 / $300,000 = 6.49%. Annual cash flow = $19,468.80 – $18,203.56 debt service = $1,265 ($105.44/month). Cash-on-cash = $1,265 / $76,000 = 1.66%. DSCR = $19,468.80 / $18,203.56 = 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.

What each metric actually tells you

Net operating income (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 return divides annual cash flow by the cash you actually invested, so it reflects leverage: the same property can show a 6.5% cap rate and a 12% cash-on-cash with the right financing. 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 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 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. These screens filter deals in seconds; this calculator then does the real math on the survivors.

Why the holding-period model matters

First-year metrics can mislead. A property with thin year-1 cash flow can still be a strong investment if rents grow and the loan amortizes: every payment shifts more toward principal, so your equity builds even when cash flow is flat. The sale model captures the other half of the return: appreciation compounds on the full property value while you only invested the down payment, which is how leverage multiplies gains (and losses). The worked example above earns most of its return at sale, not from rent.

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. The tax entered is applied as one flat rate to that gain. Real tax treatment splits depreciation recapture (taxed up to 25% federally) from long-term gains and varies by state, so treat the tax line as a planning estimate and confirm with a tax professional before a real sale.

What competing calculators miss

The best rival tools compute NOI, cap rate, cash-on-cash, and even break-even occupancy well, but they stop at year one: no multi-year rent growth, no loan-balance walk, no sale proceeds, no capital gains tax. One competitor adds sensitivity analysis but still never models the exit. Zillow stretches metrics over 5 to 30 years but skips tax and depreciation entirely. This page does both halves: the full first-year screening set investors expect (NOI, cap rate, cash-on-cash, DSCR, break-even, 1% rule) plus the complete holding-period and after-tax sale model no competitor offers.

Frequently asked questions

How do you calculate profit on a mortgaged rental property?

Add rental cash flow over the holding period to after-tax sale proceeds, then subtract your initial cash investment. Cash flow = rent minus vacancy, expenses, management, and mortgage payments; sale proceeds = appreciated value minus remaining loan balance, selling costs, and capital gains tax.

What is a good cash-on-cash return?

Many investors target 8 to 12%, with 5 to 8% acceptable in expensive coastal markets. Under 4% usually means the deal depends entirely on appreciation.

What is the 1% rule in real estate?

Monthly rent should be at least 1% of the purchase price for the property to cash flow comfortably. A $2,600 rent on a $300,000 property is 0.87%, which fails the screen.

What is DSCR and what is a good value?

The debt service coverage ratio is NOI divided by annual mortgage payments. Above 1.0 the rent covers the loan; lenders typically want 1.2 or higher for investment loans.

How is the monthly mortgage payment calculated?

With the standard amortization formula: payment = principal x r(1+r)^n / ((1+r)^n – 1), where r is the monthly rate and n the number of payments. A $240,000 loan at 6.5% over 30 years is $1,516.96 per month.

Does appreciation really matter that much?

Often more than rent. At 4% annual appreciation, a $300,000 property is worth about $444,000 in 10 years, and that gain accrues on the full value while you invested only the down payment.

How does depreciation affect my profit?

Depreciation shelters rental income from tax each year but reduces your cost basis, increasing the taxable gain when you sell. This tool models both sides with an 80% building-value assumption.

What are typical selling costs?

Budget 6 to 8% of the sale price: agent commissions (often 5 to 6%) plus closing costs, transfer taxes, and any seller concessions.

What is break-even occupancy?

The occupancy rate at which rental income exactly covers operating expenses plus debt service. Lower is safer: a property that breaks even at 70% occupancy survives vacancies that would sink one needing 95%.

Is this investment advice?

No. It is a planning estimate using standard formulas and simplified tax assumptions. Verify financing with a lender and tax treatment with a professional before buying.