Real estate & rental
Rental Property Profit Calculator
Works profit on a rental, where accounting profit and cash in hand differ.
Result
Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
Rental income less operating expenses, less interest, less depreciation where it is being accounted for, giving a profit figure, shown alongside the cash position. The two diverge because depreciation reduces profit without consuming cash while principal repayment consumes cash without reducing profit.
What moves the number
- Operating expenses and what is capitalised against expensed.
- Interest against total debt service.
- Depreciation, which is not a cash cost.
- Capital expenditure, which is cash but not an expense.
Where this one goes wrong
Depreciation and principal repayment pull in opposite directions, which is why a rental can show an accounting loss while generating cash and can show a profit while requiring funding. Know which figure you are looking at and why they differ. Capital improvements are the other divergence: they consume cash immediately and are deducted over time, so a year with a new roof looks far better on paper than it felt.
Before you quote
- Show the cash position alongside the profit figure.
- Use interest rather than total debt service in the profit calculation.
- Treat capital improvements separately from operating expenses.
Questions
About this calculator
Why does my rental show a loss but generate cash?
Depreciation reduces the profit figure without consuming cash. Meanwhile principal repayment consumes cash without reducing profit, so the two measures pull in opposite directions and both can be correct at once.
Should debt service or interest be deducted?
Interest for a profit calculation, since principal repayment is a balance sheet movement rather than an expense. Deducting the whole payment understates profit, which is a common error in owner-prepared figures.
How do capital improvements affect the figures?
They consume cash immediately and are deducted over time, so a year containing a new roof looks much better on paper than it felt in the bank account. Keeping them separate from operating expenses is what makes both figures readable.
The formula
gross profit = revenue - direct costs
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How to use this calculator
- Revenue ($). Enter your own figure; the page starts at $38,000.
- Direct labour ($). Enter your own figure; the page starts at $16,000.
- Marketing, staging and photography ($). Enter your own figure; the page starts at $11,000.
- Other direct costs ($). Enter your own figure; the page starts at $2,200.
The result updates as you type, so you can try a figure, see what it does to gross profit, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Revenue | $38,000 |
| Direct labour | $16,000 |
| Marketing, staging and photography | $11,000 |
| Other direct costs | $2,200 |
What comes out
| Result | Value |
|---|---|
| Gross profit main result | $8,800 |
| Gross margin | 23.2% |
| Total direct cost | $29,200 |
| Profit per working day | $400 |
That is $8,800 at a 23.2% margin, about $400 for every working day. Overhead still has to come out of it.
How sensitive the answer is
Holding everything else steady and changing only revenue, this is what happens to gross profit. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Revenue ($) | Gross profit |
|---|---|
| $19,000 | -$10,200 |
| $28,500 | -$700 |
| $38,000 example above | $8,800 |
| $57,000 | $27,800 |
| $76,000 | $46,800 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Revenue ($)
- A money amount, starting at $38,000.
- Direct labour ($)
- A money amount, starting at $16,000.
- Marketing, staging and photography ($)
- A money amount, starting at $11,000.
- Other direct costs ($)
- A money amount, starting at $2,200.
What the results tell you
| Result | What it is |
|---|---|
| Gross profit | The headline result. A money figure. |
| Gross margin | A percentage. |
| Total direct cost | A money figure. |
| Profit per working day | A money figure. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.