Question 1

What is a good cap rate for rental property?

Accepted Answer

A cap rate of 4–10% is generally considered acceptable, depending on the market. Urban markets with high appreciation potential (NYC, LA) often see 3–5% cap rates, while Midwest markets may offer 7–10%.

Question 2

What is the 1% rule for rental properties?

Accepted Answer

The 1% rule states that a rental property's monthly rent should be at least 1% of its purchase price. A $200,000 property should rent for at least $2,000/month to pass this quick screening test.

Question 3

How do I calculate cash flow on a rental property?

Accepted Answer

Cash flow = Monthly Rent – (Mortgage Payment + Property Tax + Insurance + Maintenance + Vacancy + Management Fees). Positive cash flow means you earn money each month after all expenses.

Question 4

What expenses do rental property owners forget to include?

Accepted Answer

Commonly overlooked expenses include vacancy rate (typically 5–10%), capital expenditures (roof, HVAC replacement), property management fees (8–12%), and landlord insurance.

Question 5

Is rental property a good investment?

Accepted Answer

Rental property can provide strong returns through cash flow, appreciation, tax benefits, and mortgage paydown. However, it requires active management or hiring a property manager and carries liquidity risk.

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