Los Angeles Real Estate Investment Calculator
Los Angeles Real Estate Investment Calculator
Use this Los Angeles real estate investment calculator to see what a rental property could earn after its costs and its loan. Enter the price, the rents and your costs, and it shows net operating income (NOI), cap rate, cash flow, cash-on-cash return, gross rent multiplier (GRM) and debt service coverage ratio (DSCR). A longer-term view adds the return over your hold period (IRR) and the equity multiple. It works for a single-family home, a townhouse, a condo or a building with two or more units. The numbers are estimates for planning, not advice, a quote or a loan approval.
How to use the calculator
Start with the example numbers already filled in and change any of them. Pick the property type, add each unit’s rent, then adjust the price, down payment, loan rate, vacancy and costs. Add the year the building was built to see whether it is likely under the City of Los Angeles Rent Stabilization Ordinance (RSO), then confirm it in ZIMAS. Open the longer-term view to set your hold period, rent growth and sale assumptions. When you are done, enter your name and email address to have the numbers emailed to you.
Investment terms in plain words
- NOI (net operating income): rent collected minus the costs of running the property, before the loan payment.
- Cap rate: NOI divided by the price.
- Cash flow: NOI minus the loan payments.
- Cash-on-cash return: one year of cash flow divided by the cash you put in.
- GRM (gross rent multiplier): the price divided by a year of rent before costs.
- DSCR (debt service coverage ratio): NOI divided by a year of loan payments.
- IRR (internal rate of return): the yearly return on your cash over the hold period, including the sale.
Loan options for a rental property
Under the results, the calculator compares a 30-year fixed loan, a 15-year fixed loan, an adjustable-rate loan, an interest-only or bridge loan and a DSCR investor loan, and says which one looks like the best bet for the numbers you entered. These are suggestions, not loan offers. A lender decides the rate and what you qualify for.
Investing in Los Angeles
Rents, property taxes, insurance and rent rules differ from one Los Angeles community to the next. Pick a community at the top of the calculator to see the public data for it, then compare your numbers with real listings and rents there. Check out some local Los Angeles Communities here, to get an idea of where to start.
Buyer Tools
See what a rental could earn after its costs and its loan. Every figure is an estimate for planning, not advice. Matt Peyman is a real estate agent, not a lender or a tax adviser, so check your numbers with a licensed lender and your own advisers.
Enter your numbers
For a house, a townhouse, a condo or a building with several units. The starting numbers are examples; change any of them.
Deal
Income
What the property rents for, or could rent for, each month.
Buildings with more than 25 units need a closer look. Use the Reach Out To Matt box below, or call (213) 587-1110.
Market rent is what the unit could rent for after turnover or a legal increase. Leave it blank to use the current rent.
Parking, laundry, storage.
Rent you expect to miss while units sit empty.
Expenses
In Los Angeles County the tax bill is based on the purchase price, and a one-time supplemental bill can follow. About supplemental bills
Money set aside each year for big repairs such as roofs and water heaters. Reserves are counted as an expense.
Don't know? Click here to confirm via ZIMAS. As a general rule, expect a building to be RSO if it was first built on or before October 1, 1978 (City of Los Angeles).
Allowed yearly rent increases are capped. Check the current cap with the LA Housing Department before you rely on rent growth.
Costs you pay as the owner, each month. Leave a line at 0 if the tenant pays it.
Your results
Income
Net operating income (NOI)
—
Rent collected minus operating costs, before the loan payment.
Expense ratio
—
Operating costs divided by rent collected.
Break-even occupancy
—
Operating costs plus loan payments, divided by rent at full occupancy.
Return
Monthly cash flow
—
Annual cash flow divided by 12.
Annual cash flow
—
NOI minus a year of loan payments.
Cap rate
—
NOI divided by the purchase price.
Cash-on-cash return
—
Annual cash flow divided by the cash you put in.
Gross rent multiplier (GRM)
—
Price divided by a year of rent at full occupancy.
Rent-to-price
—
Monthly rent at full occupancy divided by price.
Year-1 equity buildup
—
Loan principal paid off in the first 12 payments.
Lender view
Debt service coverage (DSCR)
—
NOI divided by a year of loan payments.
Price per unit
—
Purchase price divided by the number of units.
Price per square foot
—
Purchase price divided by building square feet.
Longer-term view: hold, sale and IRR
Project the rent, costs and loan year by year, then sell at the end. Results update as you type, even while this section is closed.
How long you keep it before selling.
Applies to every unit and other income. A minus sign means a decline.
Insurance, utilities, HOA dues, reserves and other costs.
California limits yearly growth of the taxed value to 2 percent under Prop 13 (Board of Equalization).
Only matters if you entered a market rent.
Agent fees, transfer taxes, closing.
Years paying interest only before the loan amortizes.
Sale and return
Levered IRR
—
Yearly return on the cash you put in, counting cash flow and the sale.
Return without the loan (unlevered IRR)
—
Yearly return if you paid all cash: NOI each year and the sale, with no loan.
Equity multiple
—
Total cash back (cash flow plus sale) divided by the cash you put in at purchase.
Total profit
—
All cash flow plus sale proceeds, minus cash in.
Sale price
—
NOI of the year after the hold, divided by the exit cap rate.
Net sale proceeds
—
Sale price minus cost of sale and the loan payoff.
Year by year
| Year | Gross rent | NOI | Loan payments | Cash flow | Loan balance at year end |
|---|
IRR sensitivity
Levered IRR if the exit cap rate (across) or rent growth (down) ends up different. The highlighted cell is your case.
Loan sizing (optional)
If a lender gave you limits, enter them to see the largest loan they would likely allow. This is for comparison only and does not change any other number on this page.
Maximum loan
—
The smaller of the loan each limit allows.
Limit that applies
—
Which of your two limits sets the maximum.
Implied down payment
—
Price minus the maximum loan.
Implied down payment, % of price
—
Implied down payment divided by price.
Loan options
These are not loan offers or approvals. They are suggestions based on the numbers you entered. Matt Peyman is a real estate agent, not a lender, so loan terms, rates and approval come from a lender.
Leave blank if you do not have a quote. We never guess a rate.
Best bet, a suggestion
—
Based only on your numbers. A lender decides what you qualify for.
How the best bet is chosen
Only the 30-year and 15-year fixed loans at the rate you entered are considered. The yardstick is a DSCR of 1.20 (1.20 is a common yardstick, your lender may use a different one). If the 15-year fixed has a DSCR of 1.20 or more, it is the best bet. If not, and the 30-year fixed has a DSCR of 1.20 or more, the 30-year fixed is the best bet. If not, and the 30-year fixed has a DSCR of 1.00 or more, the best bet is the 30-year fixed with a thin cushion. Otherwise no loan on this list fits these numbers yet. The other three loan types are shown for comparison and are never picked as the best bet.
30-year fixedBest bet
The rate and payment stay the same for 30 years.
Can work whenYou want the lowest steady payment and plan to hold for years.
Might not work whenYou want to pay interest for the shortest time, or the rent barely covers the payment.
On your numbers
15-year fixedBest bet
The rate and payment stay the same, and the loan is paid off in 15 years.
Can work whenThe rent comfortably covers the higher payment and you want to build equity fast.
Might not work whenThe higher payment turns monthly cash flow negative.
On your numbers
Adjustable-rate (ARM), such as 5/1 or 7/1
The rate is fixed for the first 5 or 7 years, then it can change.
Can work whenYou expect to sell or refinance before the rate can change.
Might not work whenYou plan to hold long and a higher rate later would erase your cash flow. Test that in the Rate Impact calculator.
On your numbers
Enter a rate to see numbers
Interest-only or bridge loan
Short-term loan, often 6 to 24 months, where you pay interest only, then refinance or sell.
Can work whenYou are buying a property that needs work (a renovation budget or market rents above current rents) and plan to refinance or sell soon.
Might not work whenYou cannot refinance or sell by the due date, or rates and values move against you.
You entered a renovation budget or market rents, so ask lenders about this one.
On your numbers
Enter a rate to see numbers
DSCR investor loan
The lender looks mostly at the property's rent compared with the loan payment, not your paycheck.
Can work whenYour DSCR is at or above about 1.0 to 1.25, shown live below as "Your DSCR on a 30-year fixed: X.XX".
Might not work whenThe property's rent is low compared with the price, or you want the lowest rate (these loans often cost more than standard loans). Lenders set their own limits.
On your numbers
Ready to talk about an investment property?
Matt can walk through these numbers with you and compare them with real listings and rents in the community you picked.
Keep running the numbers.
