In this video I use the advanced calculator to model a real deal I found on Zillow, and talk through how I estimate expenses using just listing photos, and decide whether a deal is worth further diligence. Here is what the output of this tool looks like. The ability to add in additional income (laundry, RUBS, etc).Charts that show projected income, expenses, and cash flow projections for the next 30 years.If you’re interested in taking a deeper dive on a property, I built a more advanced calculator that also shows you: The calculator above is a great resource to quickly check if a rental property has the potential to be a good investment, but is still missing some important information you’d want if you’re seriously evaluating a property for purchase. How do expenses change with bigger properties?Īdvanced Rental Property Calculator (free).What is a good return for a rental property?.A video tutorial where I model a real deal and discuss expenses.My personal rental property calculator spreadsheet that I use (free).In this article, I’m going to give you one of the most important tools in any real estate investor’s toolbox: a financial model for rental property that you can stand behind. Properties that look nice and seem like they might be a good deal often end up being bad investments that would lose you money every single year if you made the mistake of purchasing them.Ī great rental property calculator takes the guesswork out of forecasting your cash flow, and makes it much easier to grow a profitable portfolio. However, understanding how an investment property is going to perform can be very difficult to do without the right tools. If you’re able to project how a rental property is going to perform, and you’re able to understand exactly how much cashflow you’re going to have after your mortgage and expenses, you can build a successful portfolio. While growing my portfolio, I’ve looked at hundreds, if not thousands of deals, and one thing became very clear: investing in real estate is a numbers game, and cash flow is king. Over the past few years I’ve grown my real estate portfolio from a small 4plex that I house hacked, to 22 apartments worth over $1.6 Million dollars. Ben has a rental portfolio of 22 doors, and has used the calculators in this article hundreds of times in For this reason - despite the fact that it is more or less an estimation - many investors find it to be incredibly useful when comparing between potential investments.About The Author: Ben Mizes is a real estate investor, licensed real estate agent, and CEO of Clever Real Estate. EGI may not be the only metric used for this purpose, but it is definitely unique in its inclusion of potential losses caused by vacancies or partial payments. Generally speaking, it is important to know whether or not the property you are considering purchasing can generate enough positive cash flow to cover its operating expenses and turn a profit.

The EGI can also be used to help a lender assess the debt service coverage ratio.Įffective gross income is an essential calculation for an investor because it is used to forecast an asset’s positive cash flow.

Vacancies are common and relatively easy to account for, while credit losses come into play when a tenant does not pay part or all of rent owed.ĮGI is a common factor in the valuation and underwriting stages of commercial real estate debt transactions, as it is an important metric in the calculation of a property’s Net Operating Income (NOI) and Cap Rate. EGI is calculated by taking a property’s GPI and subtracting vacancies and credit loss. GPI is the total income that a property could potentially generate, while EGI is the income that a property owner is actually earning. Gross Potential Income (GPI) is a metric used to determine the Effective Gross Income (EGI) of a property.

Positive cashflow property calculator