Short answer
A rental property analysis takes rent, subtracts vacancy and every operating cost to get net operating income (NOI), then subtracts the mortgage to get cash flow. Example: a $250,000 house renting at $2,200 with 25% down at 7% has NOI of $15,828.00, a 6.33% cap rate and just $71.56 a month of cash flow.
- Order of operations: rent - vacancy - operating costs = NOI; NOI - mortgage = cash flow.
- Worked $250,000 deal: cap rate 6.33%, cash-on-cash 1.23%, DSCR 1.06, fails the 1% rule.
- Leaving out vacancy, management, repairs and CapEx turns $71.56 a month into $577.56 on paper.
- A $160,000 house at $1,900 rent clears the 1% rule with 9.77% cash-on-cash on the same assumptions.
On this page
- How do you analyze a rental property?
- Rental property calculator: try your own deal
- Worked example: a $250,000 rental, line by line
- The same analysis on a deal that works
- What are the 1%, 2%, 50% and 7% rules for rental property?
- The costly mistake: leaving out vacancy, management and CapEx
- Excel formulas for a rental property analysis
- Analysis spreadsheet vs expense tracker vs rental apps
- What to put in your rental property analysis template
- Step-by-step
- FAQ
How do you analyze a rental property?
Work down from rent to cash in your pocket, then compare the result with the cash you put in. Every metric on this page comes from the same seven inputs: price, rent, down payment, interest rate, taxes, insurance and your expense percentages.
| Metric | Formula | What it tells you |
|---|---|---|
| Mortgage (P&I) | PMT(rate/12, years x 12, loan) | Your fixed monthly debt cost |
| Net operating income | Rent after vacancy - operating costs | What the property earns before financing |
| Cap rate | Annual NOI / price | Return if you paid all cash, before closing costs |
| Cash flow | NOI - mortgage | What is left each month |
| Cash-on-cash return | Annual cash flow / cash invested | Return on the money you actually put in |
| DSCR | NOI / mortgage payment | How comfortably rent covers the loan |
| 1% rule | Monthly rent / price | A quick screen, not a verdict |
Cap rate ignores the loan; cash-on-cash includes it. That difference is the subject of the cash-on-cash return guide, which runs the same deal at several down payments.
Rental property calculator: try your own deal
Enter the asking price, the rent you can support with comparable listings, and your financing. The defaults match Deal A below so you can check every line against the tables.
This is a screening tool, not investment advice. Rent, rates, taxes and insurance here are assumptions; replace them with quotes and listings for the property you are looking at.
Worked example: a $250,000 rental, line by line
Deal A looks fine at a glance - $2,200 of rent against a $1,247.44 mortgage. Itemise the costs and most of the gap disappears.
| Line | Working | Monthly |
|---|---|---|
| Scheduled rent | Input | $2,200.00 |
| Vacancy | 5% x $2,200 | -$110.00 |
| Rent after vacancy | $2,200 - $110 | $2,090.00 |
| Management | 8% x $2,200 | -$176.00 |
| Maintenance reserve | 5% x $2,200 | -$110.00 |
| CapEx reserve (roof, HVAC, water heater) | 5% x $2,200 | -$110.00 |
| Property tax | $3,000 / 12 | -$250.00 |
| Insurance | $1,500 / 12 | -$125.00 |
| Net operating income | $2,090 - $771 | $1,319.00 |
| Mortgage (P&I) | PMT(7%/12, 360, $187,500) | -$1,247.44 |
| Cash flow | $1,319 - $1,247.44 | $71.56 |
Worked example: Deal A: $250,000 house, $2,200 rent, 25% down at 7% for 30 years (all inputs are assumptions)
| Item | Value |
|---|---|
| Down payment % (input) | 25% |
| Closing costs % (input) | 3% |
| Repairs / rehab (input) | $0.00 |
| Interest rate % (input) | 7% |
| Loan term (years) (input) | 30 |
| Vacancy % (input) | 5% |
| Management % of rent (input) | 8% |
| Property tax a year (input) | $3,000.00 |
| Insurance a year (input) | $1,500.00 |
| Maintenance % of rent (input) | 5% |
| CapEx reserve % of rent (input) | 5% |
| HOA a month (input) | $0.00 |
| Other costs a month (input) | $0.00 |
| Purchase price (input) | $250,000.00 |
| Monthly rent (input) | $2,200.00 |
| Loan amount | $187,500.00 |
| Mortgage payment (P&I) a month | $1,247.44 |
| Cash invested | $70,000.00 |
| Rent after vacancy | $2,090.00 |
| Operating costs a month | $771.00 |
| Net operating income a year | $15,828.00 |
| Cap rate | 6.33% |
| Cash flow a month | $71.56 |
| Cash flow a year | $858.69 |
| Cash-on-cash return | 1.23% |
| Passes the 1% rule? | No |
| Rent as % of price | 0.88% |
| Debt service coverage ratio | 1.06 |
Computed with the same formulas as the free calculators on this site. Change any input in the calculator above to see your own numbers.
Cash invested is the $62,500 down payment plus 3% closing costs ($7,500): $70,000.00. A year of cash flow ($858.69) on that is a 1.23% cash-on-cash return. A DSCR of 1.06 means NOI covers the loan by only 6%; one surprise repair turns the year negative. On these assumptions Deal A is a pass unless the price or the rent changes.
The same analysis on a deal that works
Deal B uses identical financing and expense percentages on a cheaper house with proportionally higher rent (tax $2,400 and insurance $1,200 a year). The spreadsheet gives a very different answer.
Worked example: Deal B: $160,000 house, $1,900 rent, same financing and expense percentages; $2,400 tax and $1,200 insurance a year
| Item | Value |
|---|---|
| Down payment % (input) | 25% |
| Closing costs % (input) | 3% |
| Repairs / rehab (input) | $0.00 |
| Interest rate % (input) | 7% |
| Loan term (years) (input) | 30 |
| Vacancy % (input) | 5% |
| Management % of rent (input) | 8% |
| Property tax a year (input) | $2,400.00 |
| Insurance a year (input) | $1,200.00 |
| Maintenance % of rent (input) | 5% |
| CapEx reserve % of rent (input) | 5% |
| HOA a month (input) | $0.00 |
| Other costs a month (input) | $0.00 |
| Purchase price (input) | $160,000.00 |
| Monthly rent (input) | $1,900.00 |
| Loan amount | $120,000.00 |
| Mortgage payment (P&I) a month | $798.36 |
| Cash invested | $44,800.00 |
| Rent after vacancy | $1,805.00 |
| Operating costs a month | $642.00 |
| Net operating income a year | $13,956.00 |
| Cap rate | 8.72% |
| Cash flow a month | $364.64 |
| Cash flow a year | $4,375.64 |
| Cash-on-cash return | 9.77% |
| Passes the 1% rule? | Yes |
| Rent as % of price | 1.19% |
| Debt service coverage ratio | 1.46 |
Computed with the same formulas as the free calculators on this site. Change any input in the calculator above to see your own numbers.
| Metric | Deal A ($250,000 / $2,200) | Deal B ($160,000 / $1,900) |
|---|---|---|
| Rent as % of price | 0.88% | 1.19% |
| Cap rate | 6.33% | 8.72% |
| Cash flow a month | $71.56 | $364.64 |
| Cash-on-cash return | 1.23% | 9.77% |
| DSCR | 1.06 | 1.46 |
| Passes the 1% rule? | No | Yes |
The lesson is not "buy cheap houses". It is that rent relative to price drives everything below it, and the spreadsheet shows that before you make an offer.
What are the 1%, 2%, 50% and 7% rules for rental property?
They are screening shortcuts that estimate one line of the full analysis. Use them to discard listings quickly, never to approve one. Here is each rule applied to Deal A:
- 1% rule - monthly rent should be at least 1% of the price. Deal A needs $2,500; it gets $2,200 (0.88%). Fail.
- 2% rule - the same test at 2%. Deal A would need $5,000 a month. It is twice as strict as the 1% rule, so treat a pass as a prompt to check the numbers, not as proof of a bargain.
- 50% rule - assume operating costs plus vacancy eat 50% of rent. That is $1,100, leaving $1,100 against a $1,247.44 mortgage: -$147.44 a month. The itemised analysis above uses $881 ($110 vacancy + $771 costs, 40% of rent), so here the 50% rule is more pessimistic. Your real costs decide which is closer.
- 7% rule - definitions vary. One version asks for annual rent of at least 7% of price: $26,400 is 10.56% of $250,000, a pass. Another asks for 7% after expenses, which is the cap rate: 6.33%, a fail. Know which version someone means.
The "3-3-3 rule" is also quoted with different meanings, most often as buyer readiness (months of savings and reserves before you buy) rather than deal math, so it does not replace any line in the spreadsheet.
The costly mistake: leaving out vacancy, management and CapEx
The most common error in a homemade rental spreadsheet is counting only the mortgage, taxes and insurance. It makes almost any deal look good.
| Version | Costs counted | Cash flow a month |
|---|---|---|
| Mortgage, tax and insurance only | $2,200 - $250 - $125 - $1,247.44 | $577.56 |
| Full analysis | Adds vacancy, management, maintenance and CapEx | $71.56 |
The $506 a month difference is real money you will spend - just not every month, which is why it is easy to leave out. Even if you self-manage, keep the management line: it prices your time, and it is the cost you will pay if you ever hand the property over. Your percentages may differ from the 5/8/5/5 assumptions here; the point is to have a line for each.
Excel formulas for a rental property analysis
These formulas rebuild Deal A. Inputs: B2 price, B3 monthly rent, B4 down payment %, B5 interest rate, B6 loan years, B7 vacancy %, B8 management + maintenance + CapEx % combined, B9 taxes a year, B10 insurance a year, B11 closing costs %.
Monthly mortgage (P&I)
=PMT(B5/12,B6*12,-B2*(1-B4))B2 = price, B4 = down %, B5 = rate, B6 = years. Deal A returns 1,247.44.
Monthly NOI
=B3*(1-B7)-B3*B8-(B9+B10)/12B7 = vacancy %, B8 = management + maintenance + CapEx % (18% in Deal A).
Cap rate
=B12*12/B2B12 = monthly NOI. Format as %.
Cash-on-cash return
=(B12-B13)*12/(B2*B4+B2*B11)B13 = mortgage, B11 = closing costs %. Add any repair budget to the divisor.
Debt service coverage ratio (DSCR)
=B12/B13Monthly NOI / monthly mortgage. Deal A returns 1.06.
The negative sign in PMT makes the payment show as a positive number. Google Sheets uses the same PMT syntax as Excel. For the 1% screen add =IF(B3>=B2*1%,"Pass","Fail").
Analysis spreadsheet vs expense tracker vs rental apps
A purchase analysis spreadsheet answers "should I buy this?". An expense tracker answers "what did this property cost me last year?". They are different jobs, and you may want both.
| Tool | Best at | Less suited to |
|---|---|---|
| Deal analysis spreadsheet | Screening offers: cash flow, cap rate, cash-on-cash before you buy | Bookkeeping and receipts |
| Expense tracking spreadsheet | Recording actual income and costs by property | Comparing deals you do not own yet |
| Property management / accounting apps | Bank feeds, rent collection, tax-time reports | Quick what-if tests on a listing |
The rental property deal analyzer spreadsheet is built for the first job: it calculates real cash flow after taxes, insurance, vacancy, repairs and management, plus cap rate, cash-on-cash and the 1% rule, colour-coded so a bad deal stands out. It works in Excel and Google Sheets for $14.99, or in the $49 7-template bundle.
Rental Property Deal Analyzer
The spreadsheet version of this guide for Excel & Google Sheets: type your numbers into the highlighted cells and the formulas do the rest. One-time $14.99, no subscription, instant download.
See the Rental Property Deal Analyzer →Buy now — $14.99All 7 templates — $49Instant access by email after checkout via Payhip.
What to put in your rental property analysis template
Whether you build your own or buy one, a useful template has these inputs, each in its own labelled cell so you can change one and watch the result move:
- Purchase: price, down payment %, closing costs %, repair budget.
- Loan: interest rate, term in years.
- Income: monthly rent from comparable listings, vacancy %.
- Operating costs: property tax, insurance, management %, maintenance %, CapEx %, HOA, utilities you pay.
- Outputs: mortgage, NOI, cap rate, monthly and yearly cash flow, cash-on-cash, DSCR, rent-to-price %.
If you are weighing a furnished short-term let against a long-term tenant on the same property, the Airbnb vs long-term rental guide compares the two on one set of costs. For the long-term analysis itself, the rental property analysis template has the inputs above laid out with visible formulas. This page is arithmetic, not financial advice.
Step-by-step: Rental Property Analysis Spreadsheet: Run a Full Deal Analysis
- Enter price, rent and financing. Type the price, monthly rent, down payment %, interest rate and loan term. Deal A: $250,000, $2,200, 25%, 7%, 30 years.
- Calculate the mortgage. Use =PMT(rate/12, years*12, -loan). A $187,500 loan at 7% for 30 years is $1,247.44 a month.
- Subtract vacancy and operating costs. Take off vacancy, management, maintenance, CapEx, taxes and insurance to get NOI: $15,828.00 a year for Deal A.
- Find cash flow. Subtract the mortgage from monthly NOI. Deal A: $1,319 - $1,247.44 = $71.56.
- Compute the return metrics. Cap rate = NOI / price (6.33%); cash-on-cash = yearly cash flow / cash invested (1.23%); DSCR = NOI / mortgage (1.06).
- Screen, then decide. Check the 1% rule and your own targets. If the deal fails, find the price or rent that would make it pass before walking away.
Skip the setup: Rental Property Deal Analyzer
The spreadsheet version of this guide for Excel & Google Sheets: type your numbers into the highlighted cells and the formulas do the rest. One-time $14.99, no subscription, instant download.
See the Rental Property Deal Analyzer →Buy now — $14.99All 7 templates — $49Instant access by email after checkout via Payhip.
Frequently asked questions
How do you analyze a rental property?
Subtract vacancy and all operating costs from rent to get net operating income, subtract the mortgage to get cash flow, then divide yearly cash flow by the cash you invested. Deal A on this page returns $71.56 a month and 1.23% cash-on-cash.
What is the 50% rule for rental property?
The 50% rule assumes operating costs and vacancy take half the rent, before the mortgage. On $2,200 rent that is $1,100 of costs. It is a quick screen; an itemised analysis may come out higher or lower depending on the property's real taxes, insurance and condition.
What is the 1% rule in real estate?
The 1% rule says monthly rent should be at least 1% of the purchase price. A $250,000 house needs $2,500 a month to pass. It filters listings quickly but ignores taxes, insurance and interest rates, so always run the full numbers.
What is the 2% rule for rentals?
The 2% rule asks for monthly rent of at least 2% of the purchase price, so a $250,000 house would need $5,000 a month. It is much stricter than the 1% rule and is best treated as a rough screen rather than a buying standard.
What is a good cap rate for a rental property?
There is no single good cap rate; it depends on location, risk and your financing. A useful check is whether the cap rate beats your loan's annual payment as a percentage of the loan. At 7% for 30 years that is about 7.98%, which Deal A's 6.33% does not beat.
Is there an Excel template for rental property analysis?
Yes. You can build one from the PMT, NOI, cap rate and cash-on-cash formulas on this page, or use ProSheet Studio's $14.99 Rental Property Deal Analyzer, which calculates cash flow, cap rate, cash-on-cash and the 1% rule in Excel or Google Sheets.
What is a good spreadsheet for tracking rental property expenses?
Use a separate tracking sheet with one row per transaction: date, property, category, amount and a receipt link, plus a monthly summary. A deal analysis spreadsheet is for deciding whether to buy, not for recording what you spent afterwards.
I'm not a contractor, landlord or accountant. I build the pricing maths, and every number on this page shows its working so you can check it instead of trusting it. Watch the breakdowns on YouTube →