Investing in real estate is one of the most reliable ways to build wealth, but simply buying a property doesn't guarantee profit. The most critical metric for any buy-and-hold investor is Cash Flow. This calculator helps you analyze a potential rental property deal by breaking down income, operating expenses, and debt service to reveal the true monthly profit.
How the Calculation Works
To determine if a property is a good investment, we look at several key figures derived from your inputs:
Gross Income: This is your total monthly rent.
Operating Expenses: These are the costs to run the property, excluding the mortgage. This includes property taxes, insurance, maintenance reserves, and vacancy allowances.
Net Operating Income (NOI): This is calculated by subtracting Operating Expenses from Gross Income. It represents the profitability of the asset itself, regardless of financing.
Cash Flow: This is your final "take-home" amount after paying the mortgage (Principal & Interest) from the NOI.
Key Metrics Defined
Our calculator provides three advanced metrics to help you compare properties:
1. Capitalization Rate (Cap Rate)
Formula: Annual NOI / Purchase Price
The Cap Rate measures the natural rate of return of the property if you bought it in all cash. It is excellent for comparing the value of different properties quickly. A higher Cap Rate generally indicates a better return, though it may come with higher risk.
2. Cash on Cash Return (CoC)
Formula: Annual Cash Flow / Total Cash Invested
This is arguably the most important metric for investors using leverage (loans). It tells you how hard your actual cash (down payment) is working for you. For example, a 10% CoC return means you earn back 10% of your initial investment every year in cash flow.
Why Maintenance and Vacancy Matter
Many novice investors make the mistake of calculating cash flow by simply subtracting the mortgage from the rent. This is dangerous. Real estate requires upkeep. By setting aside a percentage for Maintenance (typically 5-10%) and Vacancy (typically 5-8%), you ensure you have funds available when repairs are needed or when the property sits empty between tenants.
Use this tool to stress-test your deals. Try increasing the interest rate or vacancy rate to see if the property still produces positive cash flow in a worst-case scenario.
function calculateCashFlow() {
// 1. Get Input Values
var price = parseFloat(document.getElementById('rpPrice').value);
var downParams = parseFloat(document.getElementById('rpDown').value);
var rate = parseFloat(document.getElementById('rpRate').value);
var years = parseFloat(document.getElementById('rpTerm').value);
var rent = parseFloat(document.getElementById('rpRent').value);
var tax = parseFloat(document.getElementById('rpTax').value);
var insurance = parseFloat(document.getElementById('rpIns').value);
var maintPct = parseFloat(document.getElementById('rpMaint').value);
var vacPct = parseFloat(document.getElementById('rpVac').value);
// 2. Validate Inputs
if (isNaN(price) || isNaN(downParams) || isNaN(rent)) {
alert("Please fill in at least the Purchase Price, Down Payment, and Monthly Rent to calculate.");
return;
}
// Set defaults for optional fields if empty
if (isNaN(rate)) rate = 0;
if (isNaN(years)) years = 30;
if (isNaN(tax)) tax = 0;
if (isNaN(insurance)) insurance = 0;
if (isNaN(maintPct)) maintPct = 0;
if (isNaN(vacPct)) vacPct = 0;
// 3. Calculate Mortgage Payment
var loanAmount = price – downParams;
var monthlyMortgage = 0;
if (loanAmount > 0 && rate > 0 && years > 0) {
var monthlyRate = rate / 100 / 12;
var numPayments = years * 12;
// M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
}
// 4. Calculate Monthly Expenses (Non-Mortgage)
var monthlyTax = tax / 12;
var monthlyIns = insurance / 12;
var monthlyMaint = rent * (maintPct / 100);
var monthlyVac = rent * (vacPct / 100);
var operatingExpenses = monthlyTax + monthlyIns + monthlyMaint + monthlyVac;
var totalExpenses = operatingExpenses + monthlyMortgage;
// 5. Calculate Metrics
var monthlyCashFlow = rent – totalExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// NOI = Income – Operating Expenses (Exclude Mortgage)
var monthlyNOI = rent – operatingExpenses;
var annualNOI = monthlyNOI * 12;
// Cap Rate = Annual NOI / Price
var capRate = 0;
if (price > 0) {
capRate = (annualNOI / price) * 100;
}
// Cash on Cash = Annual Cash Flow / Invested Cash
// Invested Cash is roughly Down Payment (ignoring closing costs for this simplified calc)
var cashOnCash = 0;
if (downParams > 0) {
cashOnCash = (annualCashFlow / downParams) * 100;
}
// 6. Display Results
document.getElementById('dispMortgage').innerText = formatCurrency(monthlyMortgage);
document.getElementById('dispExpenses').innerText = formatCurrency(totalExpenses);
document.getElementById('dispNOI').innerText = formatCurrency(annualNOI);
document.getElementById('dispCap').innerText = capRate.toFixed(2) + "%";
document.getElementById('dispCoC').innerText = cashOnCash.toFixed(2) + "%";
var cfElement = document.getElementById('dispCashFlow');
cfElement.innerText = formatCurrency(monthlyCashFlow);
// Color coding for cash flow
if (monthlyCashFlow >= 0) {
cfElement.style.color = "#27ae60"; // Green
} else {
cfElement.style.color = "#c0392b"; // Red
}
// Show result section
document.getElementById('rpResults').style.display = "block";
}
function formatCurrency(num) {
return "$" + num.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
}