Investment Property Analyzer

Cap rate, cash-on-cash return, monthly cash flow, and the 70% rule check.

Property

Purchase price

Monthly rent

Loan

Down payment (%)

Interest rate (%)

Term (years)

Expenses

Property tax rate (%)

Insurance (per month)

HOA (per month)

Vacancy (%)

Management (%)

Maintenance (%)

70% Rule (for flippers)

After-repair value

Repair budget

The short answer

To judge a California rental, compare the income it produces against everything it costs. Two quick measures: cash flow (rent minus mortgage, taxes, insurance, vacancy, and maintenance) and capitalization rate (annual net operating income divided by the purchase price). High California prices often push cap rates and cash flow lower than in other states, so the numbers, not the neighborhood’s reputation, decide whether a deal works.

Frequently asked questions

Estimate the gross rent, subtract operating expenses (property tax, insurance, maintenance, vacancy, management, HOA) to get net operating income, then compare that to the price (cap rate) and to your mortgage payment (cash flow). Positive cash flow and a cap rate in line with the market suggest a workable deal.

Because prices are high relative to rents, California cap rates are often lower than the national average — sometimes in the low-to-mid single digits in expensive coastal markets. “Good” is relative to local alternatives and your strategy; some investors accept a lower cap rate betting on appreciation.

Cash flow is the money left over each month after all expenses; appreciation is the growth in the property’s value over time. Many California investors accept thin or negative early cash flow in exchange for expected long-term appreciation — a riskier bet that depends on the market continuing to rise.

Vacancy (the property won’t be rented 100% of the time), ongoing maintenance and capital repairs (roof, HVAC), property management, and California property tax that resets to your purchase price. Leaving these out makes a property look more profitable than it really is.