1. What is Rental Property Profitability?

Rental property profitability measures the return on investment for a rental property after accounting for all expenses and mortgage payments. It helps investors evaluate whether a property is a good investment.

2. How Does the Calculator Work?

The calculator uses the profitability formula:

Where:

• Annual Rental Income — Total yearly income from rent
• Annual Expenses — All property-related expenses (taxes, maintenance, etc.)
• Mortgage — Annual mortgage payments
• Total Investment — Total amount invested in the property

Explanation: The formula calculates what percentage of your investment you're earning back each year after all costs.

3. Importance of Profitability Calculation

Details: Calculating profitability helps investors compare different properties, assess investment performance, and make informed purchasing decisions.

4. Using the Calculator

Tips: Enter all values in dollars. Be sure to include all expenses (property taxes, insurance, maintenance, vacancies, etc.) for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What is a good profitability percentage?
A: Generally, 6-10% is considered good, but this varies by market and investor goals.

Q2: Should I include property appreciation?
A: This calculation focuses on cash flow. For total return, you'd need to factor in appreciation separately.

Q3: How does this differ from cap rate?
A: Cap rate doesn't include mortgage payments, while this profitability calculation does.

Q4: What expenses should I include?
A: Include all operating expenses - taxes, insurance, maintenance, repairs, property management, vacancies, and utilities if paid by owner.

Q5: How can I improve profitability?
A: Increase rent, reduce expenses, refinance to lower mortgage payments, or improve property value through renovations.