Rental Property Cash Flow Calculator
Analyze your real estate investment's monthly profitability and ROI.
How to Calculate Rental Property Cash Flow
Rental property cash flow is the amount of profit you have left each month after all operating expenses and mortgage payments have been paid. For real estate investors, positive cash flow is the lifeblood of a sustainable portfolio.
To calculate cash flow accurately, you must account for both fixed and variable expenses:
- Fixed Expenses: Mortgage payments (principal and interest), property taxes, and insurance premiums.
- Variable Expenses: Maintenance, repairs, and vacancy allowance (the money set aside for when the unit is empty).
Example Calculation
Imagine you buy a property for $200,000 with 20% down ($40,000). Your mortgage is $1,000/month. You rent it for $1,800/month.
Monthly Income: $1,800
Expenses: $1,000 (Mortgage) + $200 (Taxes/Ins) + $180 (10% Maintenance) = $1,380
Net Cash Flow: $1,800 – $1,380 = $420 per month
Understanding Cap Rate vs. Cash-on-Cash Return
Investors often use two primary metrics to evaluate a deal's strength:
1. Cap Rate (Capitalization Rate): This measures the property's profitability regardless of the financing used. It is calculated by dividing the Net Operating Income (NOI) by the purchase price. A "good" cap rate varies by market but often falls between 4% and 8%.
2. Cash-on-Cash Return: This measures the yield on the actual cash you invested (your down payment and closing costs). If you put $50,000 down and make $5,000 in annual cash flow, your Cash-on-Cash return is 10%. This is often the more important number for investors using leverage.
Key Factors That Impact Your Profit
Success in rental investing depends on more than just the purchase price. You must monitor the Vacancy Rate; even a month of vacancy can wipe out an entire year's profit. Additionally, setting aside 10-15% for Maintenance and Capital Expenditures (CapEx) ensures that a broken HVAC or leaky roof doesn't force you into debt.