Organic-inorganic perovskites were fabricated through a one-step procedure with different levels of hydration water in precursor solutions. The optical properties of CH3NH3PbI3 films were investigated through spectroscopic ellipsometry and photoluminescence measurements. With the measured optical constants, the efficiency limit of perovskite solar cells is predicted with a detailed balance model. By comparing the optical measurement to that of planar heterojunction solar cells, we conclude that the radiative efficiency and porosity of the perovskite film significantly influence the performance of perovskite solar cells. An optimized hydration-water concentration is obtained for the 3CH3NH3I:1PbAc2•xH2O precursor solution. The results can provide guidance for further optimization of the device performance of perovskite solar cells by utilizing hydration water.