How the calculator works
It runs the same five numbers I run on every house before I make an offer.
- Rent if every room is full. Each room's weekly rent, times 52.
- Rent after vacancy. No house stays full all year. The default takes 10 percent off for rooms and 5 percent off for a whole-house tenant.
- Net operating income (NOI). What is left after taxes, insurance, utilities, fees, repairs, and reserves, and before the mortgage.
- Cash-on-cash return. The year's cash flow divided by the cash you put in. For rooms, that cash includes the conversion and furnishing budget. For a whole-house rental it is the down payment and closing costs only.
- Debt coverage (DSCR). NOI divided by the year's mortgage payments. At 1.25 the house earns 25 percent more than the loan costs.
The four walk-away numbers
A by-the-room deal has to clear all four of these before I spend more time on it: at least 12 percent cash-on-cash, debt coverage of 1.25 or better, $400 a month in cash flow, and $100 a month per room. If it misses one, I move to the next house.
These are my rules, not a law of nature. Set your own, write them down, and hold to them when a house looks pretty.
What this calculator leaves out
- Real rent comps. The rent per room is the number that moves everything. Look up what rooms rent for in that zip code before you trust the result.
- Appreciation, loan paydown, and taxes. This is a cash flow tool only.
How many rooms
Aim for six to eight bedrooms, and turn unused space such as a dining room, den, or bonus room into bedrooms where you can. Keep it to no more than four bedrooms per shared bathroom. The calculator checks that ratio under the walk-away numbers. A room with its own bathroom rents for more, about $250 a week against $175 on my averages, but each one needs a bathroom built.
For the reasoning behind the numbers, read rent by the room vs. whole house: the math.
Common questions
What does this calculator compare?
It takes one house and one loan and shows the monthly cash flow two ways: rented to a single tenant, and rented by the room. It also reports cash-on-cash return and debt coverage for each.
Why are expenses higher when renting by the room?
The owner usually pays the utilities and internet, furnishes the rooms, and sees more turnover and wear. The default here is 40 percent of collected rent for by-the-room and 35 percent for a whole-house rental. Change both to match your own numbers.
What rent should I enter?
My working averages are $175 a week for a room that shares a bathroom and $250 a week for a room with its own bathroom. Rents vary by city and street, so use real listings from the zip code if you have them. If you only know a monthly rent, multiply it by 12 and divide by 52.
What should I budget to convert and furnish?
PadSplit's help center suggests about $1,000 a bedroom for furnishing, and $5,000 to $10,000 to turn unused space into an extra bedroom. That page dates from 2021, so the default here uses the top of the range. Get a contractor's price for your house.
Does a passing result mean I should buy the house?
No. It means the house is worth a closer look. Before an offer you still need real rent comps for rooms in that zip code, a renovation bid, and an insurance quote.
Education only, not financial, legal, or tax advice. The starting numbers are a round-number example, not a real property. Results are estimates from the numbers you enter.