Methodology: How the Calculators Work

Every SFRCalc calculator runs in your browser and shows its arithmetic line by line. This page writes the same logic out in words, calculator by calculator, so you can check it against your own spreadsheet. If something here disagrees with what a calculator does, that is a bug, and we want to hear about it.

Jump to: Conventions · Single-family rental · Multi-family · House hacking · Short-term rental · BRRRR · Fix & flip · Wholesaling · DSCR · Rent vs. buy · Loan comparison · Seller financing · Wrap / subject-to · Market data

Conventions used throughout

• Inputs. A blank input counts as zero. Every input is held between the minimum and maximum shown for it, so a typo cannot produce a runaway or undefined result.
• Loan payments. Standard fixed-rate amortization: payment = loan × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where r is the annual rate ÷ 12 and n is the term in years × 12. At a 0% rate the payment is the loan ÷ n, and a zero term gives a zero payment.
• Annual and monthly. Property taxes and insurance are entered per year and divided by 12. Other fixed costs are entered per month. Results are rounded for display only; the math runs at full precision.
• Down payment. A percentage of the purchase price, not of price plus rehab. Closing costs and rehab are paid in cash on top of it. Where a calculator offers a cash option, choosing it sets the down payment to 100% and removes the loan.
• Percentage costs. Management, maintenance and capital-reserve costs are percentages of gross rent, taken before vacancy. Vacancy reduces rent only; other income is not reduced by vacancy and carries no management fee.
• Net operating income (NOI). Here NOI is after management, maintenance and capital reserves. That is more conservative than a figure that leaves reserves out, so a cap rate from these calculators will read lower than one quoted in marketing materials that omit them. Compare like with like.
• What is not modeled. Income taxes, depreciation, inflation and rent growth are left out, except where a calculator says otherwise (rent vs. buy models appreciation and rent growth). Taxes, insurance and HOA dues are held flat. Closing costs are never financed.
• Defaults. The pre-filled values on each page describe a deliberately ordinary example. They are illustrative, not market data for any place. Replace them with your own figures.

Single-family rental

• Effective income = gross rent − vacancy (a % of rent) + other income.
• Operating expenses = property tax ÷ 12 + insurance ÷ 12 + HOA + management % + maintenance % + capital-reserve %, each percentage of gross rent.
• NOI = effective income − operating expenses. Monthly cash flow = NOI − loan payment.
• Cap rate = NOI × 12 ÷ (purchase price + rehab). It ignores financing by design, so it does not change with the down payment, rate or term.
• Cash invested = down payment + closing costs + rehab. Cash-on-cash return = annual cash flow ÷ cash invested.
• Rent-to-cost = monthly rent ÷ (price + rehab), shown as a percentage. It is descriptive and is not scored pass or fail.
• Maximum offer at a target cap rate = NOI × 12 ÷ target cap rate − rehab. It shows a dash when no target is entered, when NOI is zero or negative, or when the result is zero or less.

Multi-family

• Gross potential rent = rent per unit × number of units. Vacancy is a % of that. Effective gross income = gross potential rent − vacancy + other income.
• Operating expenses = property tax ÷ 12 + insurance ÷ 12 + utilities + administrative costs (both monthly inputs) + management %, maintenance % and capital-reserve % of gross potential rent.
• NOI, cash flow, cap rate and cash-on-cash return are calculated as for a single-family rental.
• Price per unit = (price + rehab) ÷ units. Gross rent multiplier = price ÷ annual gross potential rent. Cash flow per unit = monthly cash flow ÷ units.

House hacking

• Monthly housing payment = loan payment + property tax ÷ 12 + insurance ÷ 12 + HOA + monthly mortgage insurance (zero for a cash purchase).
• Rent from the other units = rent entered × (1 − vacancy). Maintenance % and capital-reserve % are taken on the rent entered, before vacancy.
• Net monthly cost to live there = housing payment − net rent from other units + those reserves. Savings versus renting = what a comparable unit would cost you to rent − that net cost.
• Fully rented scenario (you move out and rent your own unit at the rent you entered for it): NOI = (other units' rent + your unit's rent) × (1 − vacancy) − property tax ÷ 12 − insurance ÷ 12 − HOA − maintenance and capital reserves on the combined rent entered, before vacancy. Cash flow = NOI − loan payment − mortgage insurance. Cash-on-cash = annual cash flow ÷ (down payment + closing costs).
• No management fee is modeled; the calculator assumes you manage the property yourself.

Short-term rental

• Nights booked per month = 30.4 × occupancy. Stays per month = nights booked ÷ average length of stay. Rental revenue = average daily rate × nights booked.
• Cleaning fees collected = stays × fee charged. Cleaning cost = stays × what each cleaning costs you.
• Platform fees, management, maintenance and capital reserves are percentages of rental revenue (cleaning fees are excluded). Property tax ÷ 12, insurance ÷ 12, HOA, utilities and supplies are fixed monthly costs.
• NOI = rental revenue + cleaning fees − cleaning cost − percentage costs − fixed costs. Cash flow = NOI − loan payment.
• Cap rate = NOI × 12 ÷ (price + rehab); furnishing is not in that denominator. Cash invested for cash-on-cash does include furnishing and rehab, along with the down payment and closing costs.
• Break-even occupancy = the lowest occupancy, tested in steps of 0.2 percentage points, at which monthly cash flow is zero or better. It reads "Never" if no occupancy up to 100% gets there. RevPAR = daily rate × occupancy.
• The model uses one average month. It does not model seasonality.

BRRRR

• The purchase loan is price − down payment, paid interest-only during the hold. Holding costs = (monthly interest + other monthly holding costs) × months held.
• Total cash invested = down payment + closing costs + rehab + holding costs.
• Refinance loan = after-repair value × refinance loan-to-value. Cash out = refinance loan − payoff of the purchase loan − refinance closing costs. Cash left in the deal = total invested − cash out, which is negative if more comes back than went in.
• Rental income uses the post-rehab rent: rent − vacancy − property tax ÷ 12 − insurance ÷ 12 − management, maintenance and capital-reserve percentages of rent. Cash flow = NOI − the amortizing payment on the refinance loan.
• Cash-on-cash = annual cash flow ÷ cash left in the deal. It displays "Infinite" when no cash remains.
• DSCR on this page = NOI ÷ refinance payment. That is a different definition from the lender-style DSCR on the DSCR page, so the two numbers are not interchangeable.

Fix & flip

• Loan = price − down payment, paid interest-only. Interest = loan × rate ÷ 12 × months held. Points = loan × points %. Holding costs = monthly holding cost × months.
• Total cost = price + closing costs + rehab + interest + points + holding costs.
• Selling costs = after-repair value (the sale price you enter) × (agent commission % + seller closing cost %) + staging. Net profit = after-repair value − total cost − selling costs.
• Cash invested = down payment + closing costs + rehab + interest + points + holding costs. Return on investment = net profit ÷ cash invested. Annualized return = return × 12 ÷ months held, a simple scaling rather than compounding.
• The 70% line = after-repair value × 70% − rehab. The page flags Pass when the price entered is at or below it. It is a reference line shown beside the full arithmetic, not a verdict on the deal; this article explains where it breaks down.

Wholesaling

• Maximum allowable offer for the end buyer = after-repair value × target % − repairs. The target % is an input.
• End buyer's price = contract price + assignment fee. Cushion = maximum allowable offer − end buyer's price. The page flags Pass when the end buyer's price is at or below the maximum allowable offer.
• Profit = assignment fee − marketing − title and closing fees. Cash at risk = earnest money + marketing. Return = profit ÷ cash at risk.
• The model treats the deal as closing. Earnest money appears as cash at risk and is not subtracted from profit.

DSCR loan qualifier

• Qualifying rent = market rent × the percentage of rent the lender counts (an input).
• Monthly housing obligation (PITIA) = loan payment + property tax ÷ 12 + insurance ÷ 12 + HOA. DSCR = qualifying rent ÷ PITIA. The page reports whether that meets the minimum you enter; lenders differ, so the minimum is an input and not a rule the site asserts.
• Largest supportable loan: the maximum payment is qualifying rent ÷ minimum DSCR − (property tax + insurance + HOA, monthly). That payment is converted to a loan amount using your rate and term. Largest supportable price = largest loan ÷ (1 − down payment %). Room = largest loan − the loan you entered.

Rent vs. buy

• Each year the home's value grows by the appreciation rate. The buyer's yearly cost = loan payments (while the loan term lasts) + property tax + insurance + HOA (entered monthly, so × 12) + maintenance % of that year's home value. The renter pays the rent, which grows by the rent-growth rate each year after the first.
• The renter starts with the buyer's down payment and closing costs invested. Each year: portfolio = portfolio × (1 + investment return) + (buyer's cost − rent). If renting is cheaper, the difference is added; if buying is cheaper, it is withdrawn.
• Buyer's net worth = home value − remaining loan balance − selling costs (a % of value). Renter's net worth = the portfolio. The headline is the difference at your chosen horizon. The break-even year is the first year the buyer's net worth is at least the renter's.
• Property tax, insurance and HOA dues are held flat. The model has no mortgage-interest deduction, capital-gains or investment taxes, or mortgage insurance, and it applies the same return every year.

Loan comparison

• Up to three loan options (A, B, C) are compared on the same loan amount. For each: monthly principal and interest; upfront cost = loan × points % + fees.
• Over the holding period (the shorter of your horizon and the loan term), interest paid = payments made − principal repaid. Total cost = upfront cost + interest paid. The lowest total cost is highlighted.
• Break-even on paying more upfront = extra upfront cost (compared with the cheapest-upfront option) ÷ monthly payment saved. It is blank when there is no extra cost or no saving.
• The comparison does not count the remaining balance, tax effects, or what else the cash could earn.

Seller financing

• Seller's note = price − down payment. Payments are either interest-only (note × rate ÷ 12) or standard amortizing payments over the amortization term you enter.
• Balloon balance = the remaining balance when the balloon comes due (the full note if interest-only). If the balloon date is at or after the end of the amortization term, the note fully pays off and there is no balloon.
• Total collected = down payment + payments received through the balloon date + balloon balance. Interest earned = total collected − price. This is the seller's view of the deal.

Wrap / subject-to

• Underlying payment = standard payment on the existing loan's balance, rate and remaining term. New payment = payment on the new note (price − down payment), amortizing or interest-only.
• Monthly spread = new payment − underlying payment. Over your horizon, each stream is counted only while its own term runs. Total profit = down payment + cumulative spread. A negative spread is shown as negative.
• Only principal and interest are modeled. Escrowed taxes and insurance, fees, the underlying lender's rights under its loan, and default risk are not.

Where market figures come from

The market spotlights and data tools are built on named public sources, and each article states the source and as-of date for its figures. The sources the site draws on, by kind of figure:

• Median sale price: Redfin, based on closed sales.
• Days on market: Realtor.com, through the Federal Reserve's FRED database. This measures listing date to the date the listing leaves the market, which can differ from other sources' definitions.
• Rent: the Zillow Observed Rent Index, single-family series. These are asking rents, not signed leases.
• Property tax: the statute, the state revenue department or the county assessor.
• Insurance: the National Association of Insurance Commissioners for the baseline, and state insurance departments for current averages.
• Jobs and population: the Bureau of Labor Statistics and the Census Bureau.
• Investor purchase share: Redfin's quarterly investor report, which the investor purchase map reproduces.

Market figures describe a place at a point in time. They do not replace a current local quote, a title search or a conversation with a lender.

Spotted an error, or have a formula you think should work differently? Contact us.