Calculating cash flow is the fundamental step in analyzing a rental property investment. Positive cash flow indicates that the property's income exceeds its expenses, providing passive income. A negative cash flow means the property costs you money to hold every month.
Key Metrics Explained
NOI (Net Operating Income): This is your annual income minus annual operating expenses. It excludes mortgage payments. It is a pure measure of the asset's profitability.
Cash Flow: This is NOI minus your debt service (mortgage payments). This is the actual cash ending up in your pocket.
Cash on Cash Return (CoC): This measures the return on the actual cash you invested (down payment + closing costs), rather than the total loan amount. It is calculated as Annual Cash Flow / Total Cash Invested.
Cap Rate: This represents the rate of return on a real estate investment property based on the income that the property is expected to generate. It is calculated as NOI / Property Price.
The 50% Rule Estimation
While our calculator provides a precise breakdown, seasoned investors often use the "50% Rule" for quick estimates. This rule suggests that 50% of your gross rent will go toward operating expenses (excluding the mortgage). If your mortgage payment is greater than the remaining 50%, the property may have negative cash flow.
Why Vacancy and Maintenance Matter
Many new investors fail to account for vacancy and maintenance. Even in hot markets, tenants move out. Allocating 5-10% for vacancy ensures you aren't caught off guard. Similarly, roofs leak and appliances break; setting aside 5-10% of rent for maintenance and Capital Expenditures (CapEx) is crucial for long-term sustainability.
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"mainEntity": [{
"@type": "Question",
"name": "What is a good Cash on Cash return for a rental property?",
"acceptedAnswer": {
"@type": "Answer",
"text": "A 'good' Cash on Cash (CoC) return varies by investor goals and market conditions, but generally, 8-12% is considered a solid return for residential real estate. Some aggressive investors look for 15%+, while those in high-appreciation markets might accept 4-6%."
}
}, {
"@type": "Question",
"name": "Does the calculator include tax benefits?",
"acceptedAnswer": {
"@type": "Answer",
"text": "This calculator focuses on pre-tax cash flow. It calculates income and expenses but does not account for depreciation, mortgage interest deductions, or your personal income tax bracket."
}
}, {
"@type": "Question",
"name": "How do I calculate Cap Rate?",
"acceptedAnswer": {
"@type": "Answer",
"text": "Cap Rate is calculated by dividing the Net Operating Income (NOI) by the current market value or purchase price of the property. The formula is: Cap Rate = (Annual Rent – Annual Operating Expenses) / Purchase Price."
}
}]
}
function calculateRentalCashFlow() {
// 1. Get Inputs
var purchasePrice = parseFloat(document.getElementById('purchasePrice').value);
var downPaymentPercent = parseFloat(document.getElementById('downPaymentPercent').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var loanTerm = parseFloat(document.getElementById('loanTerm').value);
var closingCosts = parseFloat(document.getElementById('closingCosts').value);
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var annualTaxes = parseFloat(document.getElementById('annualTaxes').value);
var annualInsurance = parseFloat(document.getElementById('annualInsurance').value);
var monthlyHOA = parseFloat(document.getElementById('monthlyHOA').value);
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value);
var maintenanceRate = parseFloat(document.getElementById('maintenanceRate').value);
var managementFee = parseFloat(document.getElementById('managementFee').value);
// Validation
if (isNaN(purchasePrice) || isNaN(monthlyRent)) {
alert("Please enter valid numbers for Price and Rent.");
return;
}
// 2. Calculate Loan Details
var downPaymentAmount = purchasePrice * (downPaymentPercent / 100);
var loanAmount = purchasePrice – downPaymentAmount;
var totalCashInvested = downPaymentAmount + closingCosts;
// Mortgage Payment (P&I)
var monthlyRate = (interestRate / 100) / 12;
var numberOfPayments = loanTerm * 12;
var monthlyMortgage = 0;
if (interestRate > 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1);
} else {
monthlyMortgage = loanAmount / numberOfPayments;
}
// 3. Calculate Monthly Expenses
var monthlyTaxes = annualTaxes / 12;
var monthlyInsurance = annualInsurance / 12;
var vacancyCost = monthlyRent * (vacancyRate / 100);
var maintenanceCost = monthlyRent * (maintenanceRate / 100);
var managementCost = monthlyRent * (managementFee / 100);
var totalOperatingExpenses = monthlyTaxes + monthlyInsurance + monthlyHOA + vacancyCost + maintenanceCost + managementCost;
var totalExpenses = totalOperatingExpenses + monthlyMortgage;
// 4. Calculate Income & Returns
var effectiveIncome = monthlyRent – vacancyCost;
var noi = (effectiveIncome – (totalOperatingExpenses – vacancyCost)) * 12; // Annual NOI
// Note: NOI usually excludes debt service.
// Re-calculating NOI strictly: Annual Rent – Vacancy – Operating Expenses (Tax, Ins, HOA, Maint, Mgmt)
var annualGrossRent = monthlyRent * 12;
var annualVacancy = vacancyCost * 12;
var annualOperatingExpenses = totalOperatingExpenses * 12;
var annualNOI = annualGrossRent – annualVacancy – (annualOperatingExpenses – annualVacancy);
// Logic check: Operating Expenses included vacancy in the sum above? Yes.
// Let's simplify:
// OpEx = Tax + Ins + HOA + Maint + Mgmt
var monthlyOpExNoVacancy = monthlyTaxes + monthlyInsurance + monthlyHOA + maintenanceCost + managementCost;
var monthlyNOI = (monthlyRent – vacancyCost) – monthlyOpExNoVacancy;
var monthlyCashFlow = monthlyNOI – monthlyMortgage;
var annualCashFlow = monthlyCashFlow * 12;
var cocReturn = (annualCashFlow / totalCashInvested) * 100;
var capRate = ((monthlyNOI * 12) / purchasePrice) * 100;
// 5. Display Results
// Helper for currency
var fmt = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
document.getElementById('resCashFlow').innerText = fmt.format(monthlyCashFlow);
document.getElementById('resCashFlow').className = monthlyCashFlow >= 0 ? "rp-highlight" : "rp-highlight rp-negative";
document.getElementById('resCoC').innerText = cocReturn.toFixed(2) + "%";
document.getElementById('resCoC').className = cocReturn >= 0 ? "rp-highlight" : "rp-highlight rp-negative";
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
// Detailed Breakdown
document.getElementById('resGrossRent').innerText = fmt.format(monthlyRent);
document.getElementById('dispVacancyRate').innerText = vacancyRate;
document.getElementById('resVacancy').innerText = "-" + fmt.format(vacancyCost);
document.getElementById('resEffectiveIncome').innerText = fmt.format(effectiveIncome);
document.getElementById('resMortgage').innerText = "-" + fmt.format(monthlyMortgage);
document.getElementById('resTaxes').innerText = "-" + fmt.format(monthlyTaxes);
document.getElementById('resInsurance').innerText = "-" + fmt.format(monthlyInsurance);
document.getElementById('resHOA').innerText = "-" + fmt.format(monthlyHOA);
document.getElementById('resMaintenance').innerText = "-" + fmt.format(maintenanceCost);
document.getElementById('resManagement').innerText = "-" + fmt.format(managementCost);
document.getElementById('resTotalCashFlow').innerText = fmt.format(monthlyCashFlow);
// Show container
document.getElementById('resultsArea').style.display = "block";
}