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 you can do
- ✓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
What's a "good" cap rate?+
4-6% is typical for major metros. 6-9% is more common in secondary markets or for value-add deals. Cap rate alone doesn't tell you the after-tax IRR with leverage — that's what the calculator surfaces.
Is real estate always a better return than stocks?+
No. Leverage helps real estate when prices appreciate, but it cuts both ways. The calculator shows the after-tax wealth gap so you can decide based on your situation.
Does this model 1031 exchanges?+
Not directly in this version — we model a sale at the end of the hold period. A 1031 deferral is a strategic question that depends on your full estate plan; consider talking to a professional via the Advisor Recommender.
Ready to run the numbers?
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