Real Estate Investing Calculators

It depends entirely on market and risk. Class A properties in major metros often trade at 4–5%, while Class C in secondary markets might be 8–10%. A higher cap rate signals higher return and higher risk, not a better deal. Compare only against similar properties in the same submarket.

Each lender sets its own minimum, usually above 1.0 so that net operating income covers debt service with some headroom; ask your lender for its figure. Below 1.0 the property doesn't cover its own debt and you're funding the shortfall monthly.

The 50% rule is a rough screen — assume half of gross rent goes to operating expenses excluding the mortgage. Actual figures vary with property age, management, and local taxes, but budgeting 5–10% for vacancy, 5–10% for maintenance, 5–10% for capital reserves, and 8–10% for management is more realistic than most first-time projections.

The rule — monthly rent should be at least 1% of purchase price — is a quick screen, not an analysis. It's become hard to satisfy in most appreciating markets, and passing it doesn't guarantee cash flow once real expenses and current interest rates are applied. Use it to filter listings, then underwrite properly.