How Much Rent Do You Need for a Rental Property to Break Even?
Learn how to estimate the rent a rental property needs to break even after vacancy, management, mortgage payments, and operating expenses.
Investment Property Calculator
Learn more about this calculator
A rental property pencils out on cap rate, but the wealth question is whether you'd be better off with the same capital in a low-cost index fund. Our calculator runs both side-by-side over your hold period, accounting for depreciation recapture, capital gains, and the leverage advantage of real estate.
Inputs: purchase price, down payment, rate, expected rent, vacancy, expenses, appreciation. Outputs: cap rate, cash-on-cash, IRR, after-tax wealth at sale, and the same cohort's wealth if invested in a 70/30 portfolio instead.
What this calculator covers
Use these as a quick scope check before you rely on the output.
- •Cap rate and cash-on-cash return
- •IRR over hold period with leverage
- •Depreciation and recapture modeling
- •Side-by-side comparison vs equity portfolio
- •Vacancy and expense ratio defaults by region
Frequently asked questions
How do cap rate, cash-on-cash return, and IRR differ?
Cap rate is the property's yearly net operating income divided by price, before debt. Cash-on-cash return compares annual cash flow after the mortgage with the cash you invested. IRR folds in cash flow, appreciation, debt paydown, taxes, and sale proceeds over the full hold period.
What expenses should I include before deciding if a rental cash-flows?
Include vacancy, maintenance, repairs, property management, insurance, property taxes, HOA dues, utilities you cover, leasing costs, and a reserve for bigger replacements. A deal that works only when those are zero is probably too tight.
How do depreciation and recapture affect the return?
Depreciation can reduce taxable rental income while you own the property, but some of that benefit may be taxed back when you sell through depreciation recapture. The calculator estimates the tax effect, but a CPA should check the exact treatment.
Can rental losses offset my W-2 income?
Sometimes, but rental real estate is often treated as passive activity. Income, participation, and at-risk rules can limit the deduction, so model tax benefits conservatively and verify with a tax pro.
What makes a rental property too risky even if the return looks good?
Thin cash reserves, optimistic rent growth, no vacancy allowance, ignored repairs, a variable-rate loan, or one large expense wiping out a year of cash flow are warning signs. A good return should still work after stress-testing rent, vacancy, maintenance, and the sale price.
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