Rental Property Cash Flow Calculator
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Rental Property Cash Flow Calculator
Understanding Rental Property Cash Flow
Investing in real estate is a powerful wealth-building strategy, but its success hinges on the numbers. Unlike stocks, where you might rely on appreciation, a rental property is a business that must remain solvent month after month. This Rental Property Cash Flow Calculator helps you determine if a potential investment property will generate profit (positive cash flow) or cost you money out of pocket (negative cash flow).
How the Calculation Works
To accurately assess a rental property, we must look beyond just the mortgage and the rent. A comprehensive analysis involves three distinct stages:
1. Gross Income
This is the total money coming in. It includes your monthly rent, but you must account for vacancy. No property is occupied 100% of the time. A standard vacancy rate is 5% to 8%, meaning you anticipate the property sitting empty for a few weeks every year between tenants.
2. Total Expenses
Expenses fall into two categories: fixed and variable.
- Mortgage (P&I): Your principal and interest payments based on the loan amount, rate, and term.
- Fixed Costs: Property taxes, insurance, and HOA fees.
- Variable Costs: Maintenance and repairs. Even if nothing breaks this month, you should budget (usually 10-15% of rent) for when the water heater inevitably fails.
3. Net Cash Flow & ROI
Cash Flow is calculated as Gross Income – Total Expenses. If this number is positive, the property pays for itself and provides income.
Cash on Cash Return (CoC) represents the return on the actual cash you invested (down payment + closing costs + rehab costs). It is calculated as:
(Annual Cash Flow / Total Cash Invested) * 100
Many investors aim for a Cash on Cash return of 8-12% or higher, depending on the appreciation potential of the market.
What is the "1% Rule"?
A common "rule of thumb" in real estate is the 1% rule. It suggests that for a property to cash flow, the monthly rent should be at least 1% of the purchase price. For example, a $200,000 home should rent for $2,000/month. While this is a quick filter, it is not a substitute for the detailed calculation provided above, especially in high-interest-rate environments.
Why Negative Cash Flow is Risky
Some investors accept negative cash flow if they believe the property value will skyrocket (appreciation play). However, this is risky. If the market dips or you lose your personal income source, you may be forced to sell the property at a loss because you cannot cover the monthly shortfall. Prioritizing positive cash flow is the safest way to build a sustainable real estate portfolio.
function calculateCashFlow() {
// 1. Get Inputs
var price = parseFloat(document.getElementById('purchasePrice').value);
var downPaymentPercent = parseFloat(document.getElementById('downPayment').value);
var interestRate = parseFloat(document.getElementById('interestRate').value);
var termYears = parseFloat(document.getElementById('loanTerm').value);
var monthlyRent = parseFloat(document.getElementById('monthlyRent').value);
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value);
var yearlyTax = parseFloat(document.getElementById('propertyTax').value);
var yearlyInsurance = parseFloat(document.getElementById('insurance').value);
var monthlyMaintenance = parseFloat(document.getElementById('maintenance').value);
var monthlyHOA = parseFloat(document.getElementById('hoa').value);
// Validation
if (isNaN(price) || isNaN(monthlyRent) || isNaN(interestRate)) {
alert("Please enter valid numbers for Price, Rent, and Interest Rate.");
return;
}
// 2. Calculate Mortgage (P&I)
var downPaymentAmount = price * (downPaymentPercent / 100);
var loanAmount = price – downPaymentAmount;
var monthlyRate = (interestRate / 100) / 12;
var totalPayments = termYears * 12;
var mortgagePayment = 0;
if (interestRate === 0) {
mortgagePayment = loanAmount / totalPayments;
} else {
mortgagePayment = (loanAmount * monthlyRate) / (1 – Math.pow(1 + monthlyRate, -totalPayments));
}
// 3. Calculate Monthly Expenses
var monthlyTax = yearlyTax / 12;
var monthlyInsurance = yearlyInsurance / 12;
var vacancyCost = monthlyRent * (vacancyRate / 100);
var totalMonthlyExpenses = mortgagePayment + monthlyTax + monthlyInsurance + monthlyMaintenance + monthlyHOA + vacancyCost;
// 4. Calculate Cash Flow
var monthlyCashFlow = monthlyRent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// 5. Calculate Cash on Cash Return
// Assuming initial investment is just down payment for this simple calc.
// In reality, it includes closing costs and rehab, but we stick to inputs provided.
var initialInvestment = downPaymentAmount;
var cocReturn = 0;
if (initialInvestment > 0) {
cocReturn = (annualCashFlow / initialInvestment) * 100;
}
// 6. Display Results
document.getElementById('resultsArea').style.display = 'block';
document.getElementById('resMortgage').innerText = "$" + mortgagePayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resExpenses').innerText = "$" + totalMonthlyExpenses.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Net Operating Income (Income – Operating Expenses, excluding Mortgage)
// Operating Expenses = Tax + Ins + Maint + HOA + Vacancy
var operatingExpenses = monthlyTax + monthlyInsurance + monthlyMaintenance + monthlyHOA + vacancyCost;
var noi = monthlyRent – operatingExpenses;
document.getElementById('resNOI').innerText = "$" + noi.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var cashFlowEl = document.getElementById('resCashFlow');
cashFlowEl.innerText = "$" + monthlyCashFlow.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Style changes for positive/negative cash flow
if (monthlyCashFlow >= 0) {
cashFlowEl.style.color = "#27ae60"; // Green
} else {
cashFlowEl.style.color = "#c0392b"; // Red
}
document.getElementById('resCoC').innerText = cocReturn.toFixed(2) + "%";
}