Investor guide · Calculator
Is a Miami rental property a good investment? How to read the numbers
Most people judge a property by the rent it brings in. Investors look further: what the loan really costs, how much cash is left each month, when the property pays for itself, and what all of it is worth in today’s money. Our free investment calculator shows all of it, year by year, for short-term and long-term rental side by side. Here’s how to read it, and why the most honest number on the page can start out negative.
Try it with your own numbers. No sign-up, nothing is sent: it all runs in your browser.
The short version
- A rental is two investments in one: the income it earns every year, and the property itself, which grows in value while the loan shrinks.
- In the early years, a mortgaged Miami condo often costs more than it earns. Most of each payment is interest, and the owner tops up the difference.
- The return builds over time: rents and values rise while the mortgage payment stays the same, and each payment buys you more of the property.
- The “today’s money” view (NPV) asks a stricter question: does this beat the return you’ve set as your benchmark? It’s negative whenever the property’s yearly return is below that rate.
- The levers that turn the numbers positive are the ones you control: the price you pay, how you finance it, and above all how well the property earns.
- Taxes are part of the return: interest and depreciation can turn a profitable rental into a loss on paper, and a short-term rental’s loss can, if you qualify, reduce the tax on your other income.
How the calculator works
You enter what you pay (price, down payment, interest rate, loan term, or cash with no loan), what the property can earn (the long-term rent, or the short-term nightly rate and occupancy) and the costs you pay either way (HOA, property tax, insurance, maintenance). The calculator then works through every year of ownership, the way a spreadsheet would:
| Figure | How it’s worked out | What it tells you |
|---|---|---|
| Monthly payment | PMT, as in Excel: the fixed payment that repays the loan with interest over its term | Your biggest cost while there’s a loan |
| Interest and principal | Each payment split month by month: interest on what’s still owed, the rest repays the loan | How much of your payment builds your equity |
| Cash flow | Income − its costs − costs you pay either way − 12 × the payment | Money left over (or topped up) each year |
| Cash-on-cash | Cash flow ÷ cash invested (down payment + closing costs) | The yearly yield on the cash you actually put in |
| Cap rate | Income before the loan ÷ price | How well the property earns, whatever the financing |
| Profit if sold | Sale price after selling costs − loan still owed + all cash flow so far − cash invested | What you’d walk away with if you sold that year |
| Profitable from | The first year “profit if sold” is $0 or more | When the property has paid back everything you put in |
| NPV | Every future dollar discounted back to today, minus the cash invested | The gain in today’s money, after your benchmark return |
| IRR | The yearly return that makes NPV exactly $0 | The property’s return per year, sale included |
A real example: a $450,000 Miami Beach condo
The calculator opens with a typical one-bedroom: $450,000, 25% down, a 7% 30-year mortgage, $650 HOA, $8,100 property tax, $2,000 insurance and 1% a year for maintenance. Long-term, it rents for $3,000 a month. Short-term, it earns $245 a night at 62% occupancy, managed by Nomabase. Value and rents grow 3% a year.
| Short-term | Long-term | |
|---|---|---|
| Monthly mortgage payment | $2,245 | $2,245 |
| Cash invested | $126,000 | $126,000 |
| Cash flow, year 1 | −$14,134 | −$17,881 |
| Cap rate | 2.8% | 2.0% |
| Profitable from | Year 8 | Year 12 |
| Profit if sold, year 30 | $701,852 | $523,613 |
| IRR (yearly return) | 4.6% | 3.4% |
| NPV at 5% | −$21,848 | −$103,968 |
Two things stand out. First, the owner tops up the property for the first years: in year 1 the payment alone is $26,945, of which $23,516 is interest and only $3,428 repays the loan. Second, as a short-term rental the property still earns about $700,000 on top of the $126,000 put in, over 30 years. Selling would return more than the cash put in from year 8. So why is the NPV negative?
Why the return can be negative “in today’s money”
A dollar in 20 years is worth less than a dollar today, because today’s dollar could be put to work in the meantime. The calculator’s discount rate (5% by default) is that benchmark: the yearly return you’d want your cash to earn anyway. NPV takes every future dollar the property produces (the yearly cash flow and the sale at the end), shrinks each one by 5% for every year you wait for it, and subtracts the cash you put in.
The rule is simple: NPV is positive when the property’s yearly return (IRR) is higher than the discount rate, and negative when it’s lower. In the example, the short-term rental returns 4.6% a year against a 5% benchmark, so the NPV is slightly negative (−$21,848) even though the profit in plain dollars is large. It’s a verdict on whether the return clears your bar, not on whether the property makes money.
Three things push the early years down in this example:
- Front-loaded interest. In year 1, 87% of the payment is interest. That share falls every year.
- Buying and selling costs. 3% to buy and 6% to sell come straight off the return, and the shorter you hold, the more they weigh.
- The gains come late. The rise in value and the loan paydown arrive at the end, when they’re discounted the most.
The benchmark you choose changes the verdict. Set the discount rate to 3% and the same short-term rental has an NPV of +$141,991 and is profitable in today’s money from year 15. That’s why the calculator lets you set it: it should be your own bar, not ours.
What turns the numbers around
This is where property differs from most investments: you can change the outcome. Starting from the same condo, here’s what happens to the short-term rental when one thing improves:
| Change | Cash flow, yr 1 | Profitable from | IRR | NPV at 5% |
|---|---|---|---|---|
| The example | −$14,134 | Year 8 | 4.6% | −$21,848 |
| Mortgage at 6% instead of 7% | −$11,471 | Year 6 | 5.3% | +$19,088 |
| Bought at $400,000 | −$9,740 | Year 6 | 5.8% | +$42,466 |
| Bought in cash, no loan | +$12,810 | Year 2 | 5.6% | +$54,859 |
| Earns $275 a night at 70% | −$3,761 | Year 3 | 8.7% | +$205,528 |
| $275 at 70% and a 6% mortgage | −$1,098 | Year 3 | 9.6% | +$246,464 |
Income is by far the strongest lever. Lifting the nightly rate from $245 to $275 and occupancy from 62% to 70% nearly doubles the yearly return, because almost every extra dollar of income is profit: the mortgage, HOA and taxes don’t change. That’s the part a good manager controls, through pricing that follows demand night by night, listings that convert, reviews that keep occupancy high and costs kept in check.
Tax benefits: the return you don’t see in the rent
Serious investors look at property after tax, and that’s where real estate has some of its biggest advantages. Florida helps from the start: there’s no state income tax on rental profit (the sales and tourist taxes guests pay are a separate matter). On the federal side, almost every cost of owning a rental can be deducted from its income, reported on Schedule E: mortgage interest (not the principal), property tax, insurance, HOA, repairs and maintenance, utilities, management fees, and depreciation.
Depreciation: a deduction you don’t pay for
The IRS lets you deduct the cost of the building (not the land) over 27.5 years, even though you don’t spend that money each year and the property usually goes up in value. In the example, with 80% of the price as building, that’s $13,484 a year deducted from the rental’s income.
Paper losses, real savings
Add the year-1 mortgage interest ($23,516) and depreciation to the running costs, and the short-term rental in the example shows a taxable loss of about $24,000, while you’re building equity and the property is gaining value. What that loss is worth depends on what it can be set against:
- Long-term rentals: losses are usually “passive”. They can only offset other passive income, so most owners carry them forward to later years or to the sale (there’s an allowance of up to $25,000 for active owners with lower incomes).
- Short-term rentals: when the average stay is 7 days or less, the property isn’t treated as a rental for the passive loss rules. If you also materially participate (for example more than 500 hours in the year, or more than 100 hours and no less than anyone else), the loss can be non-passive and reduce the tax on your salary and other income. This is the so-called “short-term rental loophole”.
In the calculator, switch on Income taxes and the example changes: at a 24% tax rate, the short-term loss saves $5,805 of tax in year 1, the year’s cash flow improves from −$14,134 to −$8,329, and the property is profitable a year sooner. At a 32% rate, its value in today’s money turns positive. Taxes work both ways, and the calculator shows that too: when you sell, depreciation is taxed back (recapture, up to 25%) and the rest of the gain pays capital gains tax, so the profit after 30 years is lower after tax than before.
Why investors still choose property
Leverage
With $126,000 you control a $450,000 asset. Every 1% rise in its value is $4,500 for you, not $1,260. After 10 years the equity in the example is $315,146.
A fixed payment against rising income
With a fixed-rate mortgage, the payment stays the same for 30 years while rents and values tend to rise with inflation. Every year, the gap works more in your favour.
A return you can improve
Better pricing, a better listing, an upgrade or a different strategy (short-term instead of long-term) can change the result, as the table above shows.
Tax advantages
Interest, running costs and depreciation are deducted from the rental’s income, Florida has no state income tax, and a qualifying short-term rental’s losses can reduce the tax on your other income.
Something real
A home in one of the most visited cities in the US, which you can use, improve, rent, refinance or pass on.
Short-term or long-term?
In the example, short-term rental earns more at every step: a smaller loss in year 1, profitable four years sooner, and about $178,000 more profit after 30 years, even after platform fees, management and utilities. Short-term income is higher but takes more work and depends on the building allowing it; long-term is simpler, with steadier but lower income. The calculator shows both side by side so you can see the gap for your own numbers. Before you decide, check that short-term rental is allowed in the building with our Miami condo check.
How to use the calculator in five minutes
- Enter the price and how you’re buying: mortgage (down payment, rate, term) or cash.
- Enter the long-term rent and the short-term nightly rate and occupancy. Not sure? Our free property report estimates both for your address.
- Add the HOA, property tax and insurance from the listing or your statements.
- Open “Assumptions” to set your own discount rate, the years you plan to hold and growth rates.
- Switch on “Income taxes” and enter your tax rate to see the effect of depreciation and deductions, and of the tax when you sell.
- Read the comparison table, then hover over the chart: where a “profit if sold” line crosses $0, that strategy has paid for itself. The table below it shows every year.
Run the numbers on your property
Try the free calculator with your own price, loan and rent. Want real income figures for your address? Get a free report with short-term income from comparable homes nearby and the long-term rent next to it.
This article and the calculator are general information, not financial, tax or legal advice. The figures are an example built from stated assumptions; your results depend on the property, financing, market and management. The tax figures are a simplified federal estimate; tax rules are complex and change, so ask a qualified tax professional about your situation before relying on them. Short-term rental must be allowed by your building and city.