Profile picture for user468971

Break Even calculator for investment property

Hi,
Does anybody have a good break even calculator to figure out whether an investment property is worth buying/keeping vs. all the expenses that it incurs?

Thank You!
  • April 27 2012 - San Jose
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Answers (14)

Profile picture for gator70
www dot goodmortgage dot com / Calculators / Investment_Property dot html
  • January 26
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I have developed my own spreadsheet that I use.  There are a few things to build in:

Vacancy Rate 5%
Reserves  for repairs and replacements  10%
Taxes  (County Formula)
Insurance (Investor rate - varies tenant occupied or vacant)
debt service
Cap rate (you decide what you want)
Acquisition Costs over projected life of property ownership (20 years) Including rehab costs
Depreciation allowance
Loss allowance
Disposal Expense
Market Rent

The higher you make the Cap Rate the lower your acquisition costs with rehab costs have to be

The failed investors failed to think it through
  • January 26
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Try the following source:
http://realestate.about.com/od/knowthemath/ht/break_even.htm

You need to factor in taxes and contingencies (ie. vacancy rate etc)

Sam Shueh
Keller Wms Realty
  • January 26
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Profile picture for gator70
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  • January 08
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  • January 08
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Profile picture for DanLandlord
Like everyone else says, there are lots of variables to consider, and it's generally best to build your own spreadsheet for calculations. Here is a general formula though:

Estimated Monthly Rental Income - (taxes + mortpayment with interest + insurance + repairs/reserve-fund-for-repairs). 

When estimating the monthly rental income, I look at craigslist comps and you may consider even scheduling a viewing or two to get an idea of what you can reasonably charge. Zillow offers a zestimate too, which may help. 

Also, I subtract 8% from my estimated monthly rental income for vacancy loss (one month vacancy each year results in a ~8.4% decrease in total rent). 

Specific sites that have helped me are http://www.investpropertycalculator.com - Also, I recommend examining the IRS page on depreciation as a tax deduction, because this can affect the overall money you net from the investment: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/A-Brief-Overview-of-Depreciation

Lastly, consider how much capital you will need to spend upfront for a downpayment and repairs and ask yourself how long it will take to regain this capital and whether or not the opportunity costs are worth it. After all, renting is not as "passive" an investment as you may hope!


  • January 05
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  • August 19 2013
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I have a rule of thumb.  First, I determine the comparable rent.  I subtract 5% from the gross rent for vacancy loss. Then I subtract taxes, mortgage payment, and insurance.  I get the taxes from the county tax assessor's website, calculate the mortgage (principal and interest) payment using a spread sheet, and use $75 per month for insurance for a $100,000 house, double it for a house over $500,000. Then, if the resulting positive cash flow is over $200, it might be worth buying depending on other factors like age, location, etc.
  • March 19 2013
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I've been using this one, [Website removed by Zillow moderator. Please see our Good Neighbor Policy.] Pretty advanced but easy to use and understand
  • March 18 2013
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Here is an Internal Rate of Return calculator
http://www.calcxml.com/calculators/inv04
it requires many assumptions and the results are only as good as the assumptions.
Give me a call for a free no obligations consultation. Good luck
  • May 19 2012
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Profile picture for JimTrueblood
I agree with the other posters.  There are just way to many variables to put into a calculater.  Put all the monthly income and expenses on a spreadsheet and you should be able to get a pretty good idea of where you are at.  Also consider, that unless you have an interest only loan, that even if you are short each month, the principal value of the home is going down and you should be building equity.  Its hard to calculate with certainty, but another factor that you can't even put in your calculations is the possibility of appreciation.  At some point in the future we are going to see appreciation in the housing market again. 
  • May 17 2012
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Profile picture for aracz
Great advice Carl,

There are so many factors (vacancy factor, expected life of major components such as the roof, etc.) that a calculator may miss, it would be a good idea to start with a spreadsheet.

All the best,

Arpad


  • May 16 2012
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Profile picture for sunnyview
I don't know if this is exactly what you are looking for, but there is a return on investment calculator.
  • April 27 2012
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You have so many variable in an investment property  It is better to use a spreadsheet to detail items out.  That way as you continue to buy properties, your list of items to lookout for grows.  Calculators are easy in and easy out, but how valuable is your result?
  • April 27 2012
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