Calculating the potential return on a rental property is crucial before signing any purchase agreement. A Rental Property Cash Flow Calculator helps investors determine if a specific property will generate profit (positive cash flow) or result in a loss (negative cash flow) on a monthly basis.
Key Metrics Used in This Calculator
To provide an accurate assessment of investment potential, this calculator analyzes several critical real estate metrics:
Net Operating Income (NOI): This is the total income the property generates (minus vacancy losses) minus all operating expenses like taxes, insurance, and maintenance. It does not include mortgage payments.
Cash Flow: This is the net amount of money left in your pocket each month after all bills, including the mortgage, are paid. A positive cash flow is the primary goal for buy-and-hold investors.
Cap Rate (Capitalization Rate): Calculated as (Annual NOI / Purchase Price), this percentage helps compare the profitability of different properties regardless of how they are financed.
Cash on Cash Return: This metric measures the annual return specifically on the cash you invested (Down Payment + Closing Costs). It is often considered the most important metric for understanding the efficiency of your invested capital.
How to Improve Your Cash Flow
If your calculation shows negative or low cash flow, consider these adjustments:
1. Increase the Rent: Ensure your rental price aligns with the current market value. Even a $50 increase can significantly boost your Cash on Cash return.
2. Lower the Vacancy Rate: Long-term tenants reduce turnover costs. Improving property condition can help retain good tenants.
3. Refinance: Securing a lower interest rate can drastically reduce your monthly mortgage payment, instantly increasing cash flow.
Example Scenario
Imagine purchasing a property for $250,000 with a 20% down payment ($50,000). If you rent it for $2,200/month and your total monthly expenses (mortgage + taxes + insurance) equal $1,800, your monthly cash flow is $400. Over a year, that is $4,800 in passive income, yielding a Cash on Cash return of roughly 9.6%.
function calculateRental() {
// 1. Get Input Values
var price = parseFloat(document.getElementById('propPrice').value);
var downPercent = parseFloat(document.getElementById('propDownPercent').value);
var rate = parseFloat(document.getElementById('propRate').value);
var term = parseFloat(document.getElementById('propTerm').value);
var rent = parseFloat(document.getElementById('propRent').value);
var vacancyRate = parseFloat(document.getElementById('propVacancy').value);
var annualTaxes = parseFloat(document.getElementById('propTaxes').value);
var annualInsMaint = parseFloat(document.getElementById('propInsMaint').value);
var errorDiv = document.getElementById('rentalError');
var resultsDiv = document.getElementById('rentalResults');
// 2. Validate Inputs
if (isNaN(price) || isNaN(downPercent) || isNaN(rate) || isNaN(term) || isNaN(rent) ||
isNaN(vacancyRate) || isNaN(annualTaxes) || isNaN(annualInsMaint)) {
errorDiv.style.display = 'block';
errorDiv.innerHTML = "Please enter valid numbers in all fields.";
resultsDiv.style.display = 'none';
return;
}
if (price <= 0 || term 0) {
monthlyMortgage = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numPayments)) / (Math.pow(1 + monthlyRate, numPayments) – 1);
} else {
monthlyMortgage = loanAmount / numPayments;
}
// Operating Income & Expenses
var vacancyLoss = rent * (vacancyRate / 100);
var effectiveGrossIncome = rent – vacancyLoss;
var monthlyTaxes = annualTaxes / 12;
var monthlyInsMaint = annualInsMaint / 12;
var totalMonthlyOperatingExpenses = monthlyTaxes + monthlyInsMaint;
// NOI & Cash Flow
var monthlyNOI = effectiveGrossIncome – totalMonthlyOperatingExpenses;
var monthlyCashFlow = monthlyNOI – monthlyMortgage;
var annualCashFlow = monthlyCashFlow * 12;
var annualNOI = monthlyNOI * 12;
// Returns
var capRate = (annualNOI / price) * 100;
// Cash on Cash: Annual Cash Flow / Total Cash Invested (Down Payment)
// Note: Usually closing costs are added, but we simplify to Down Payment for this input set.
var cashOnCash = 0;
if (downPayment > 0) {
cashOnCash = (annualCashFlow / downPayment) * 100;
}
// 4. Update UI
document.getElementById('resMortgage').innerText = "$" + monthlyMortgage.toFixed(2);
// Vacancy loss is technically lost income, but often grouped in "Effective Income".
// Here we display "Operating Expenses" as Taxes + Ins + Vacancy Loss for clarity on "money not going to pocket".
// Alternatively, just list tax/ins/maint. Let's stick to the calculation used for NOI.
// Display Operating Expenses excluding mortgage:
document.getElementById('resExpenses').innerText = "$" + (totalMonthlyOperatingExpenses + vacancyLoss).toFixed(2);
document.getElementById('resNOI').innerText = "$" + monthlyNOI.toFixed(2);
var cfElement = document.getElementById('resCashFlow');
cfElement.innerText = "$" + monthlyCashFlow.toFixed(2);
if(monthlyCashFlow >= 0) {
cfElement.style.color = "#27ae60"; // Green
} else {
cfElement.style.color = "#c0392b"; // Red
}
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + "%";
document.getElementById('resCoC').innerText = cashOnCash.toFixed(2) + "%";
resultsDiv.style.display = 'block';
}