Free Rental Property Analysis Spreadsheet
In order to determine if a rental property investment is worth pursuing, you'll want to calculate the ROI (link), which means looking at things like expected rental income, expenses (from maintenance to property management), along with equity built in the property (provided you're financing the purchase). To help with this, we are sharing a simple spreadsheet calculator we use to project rental income. We use this to initially filter down properties, and then of course we run an even deeper dive (tweaking / validating the assumptions, checking out the property, etc) prior to purchasing.
Steps to analyzing a rental property
(1) Determine the initial total cash out of pocket to purchase the property, decide how you will finance
The first input you'll need to determine the projected income from your rental property is the total upfront cost. If you are purchasing the property in cash (e.g. without financing / a mortgage), then your cash out of pocket is simply the agreed upon price from the seller, plus any closing costs.
However, if you're purchasing the property using a mortgage, then your cash out of pocket will be your down payment (e.g. 20% of the purchase price) along with any closing costs. Note that you'll need to be sure to factor the mortgage payment into your expenses later if you're financing.
(2) Determine the renovations / repairs needed to get the property rent ready
In addition to the cash required to purchase the property above, you may also need to spend money on renovation, repairs, appliances, or even cleaning expenses in order to turn around and rent the property. You'll want to be sure to add all of these costs up and account for them when calculating your total initial out of pocket costs.
(3) Determine the monthly rental income
Now that we have the initial costs computed, we can then estimate how much income the property will generate from rent. A good starting point is simply looking for comparables (properties in similar condition and areas) and seeing what rent they are charging -- Zillow is a good starting point here. Beyond that, we also like to check out the HUD 50th percentile fair market rent data, which is broken down by county / number of bedrooms.
Generally, we like to take a conservative approach for projected rental income, so if we are seeing comparables at $2000/month, we might discount that by 5% or so when projecting out income, just to provide an extra buffer. As you gain more experience (and as you gain familiarity in a market) your estimates will become better here.
(4) Determine the monthly expenses
Next, we'll want to tally up all the projected expenses from operating the property. As you'll see in the spreadsheet, this includes things like:
- Mortgage (provided you financed the property)
- Property tax
- Property insurance
- Property management (provided you're hiring a property manager)
- Vacancy assumption
- Maintenance / repairs (including one-off CapEx)
We've populated the defaults we use into the sheet, but you'll definitely want to play around with these assumptions and adjust based on the specific property / situation.
(5) Put it all together, and project out your return
Finally, once we have our total out of pocket costs, our estimated income, and our estimated expenses, we can then run our analysis to see what the returns look like for our given property. The key return metrics shown in our spreadsheet are as follows:
- CoC (Cash-on-cash % return)
- This represents the % return on your total initial out of pocket costs. For example, if you financed a $100k property @ 20% down ($20k) and then spent $10k on renovation / repairs, your total out of pocket costs would be $30k. From there, if you generate $150/month in net income (rental income - all expenses including mortgage), your cash-on-cash return would be ($150*12) / 340,000 = 6%. You can read more about cash-on-cash return here
- Annual equity
- Provided you financed the property, this return is simply the amount of equity you built by paying down principal in the mortgage. In our sheet we assume no property appreciation (highly conservative assumption), but any appreciation would simply be tacked onto this value
- Total return
- The sum of the cash-on-cash and equity returns (e.g. the total amount of value you are generating relative to your initial investment)
For a deeper dive on calculating rental property return on investment (ROI) you can check out our write up here.
Our simple spreadsheet to project rental property income and returns
Now that we've highlighted the steps we take to analyze a rental property and project returns, we want to share the simple Google sheet that we use to screen properties. The sheet paired with our writeup above should help drive home some of the key concepts / things to keep in mind when checking out a rental property. Feel free to make a copy of the sheet for your own personal use. The link is available to anyone on the internet, so you can also pass along to anyone else who may find it useful!