Rental Property Cash Flow Calculator
Purchase & Loan Details
30 Years
15 Years
10 Years
Income & Operating Expenses
Monthly Principal & Interest:
$0.00
Total Monthly Expenses:
$0.00
Net Operating Income (Monthly):
$0.00
Monthly Cash Flow:
$0.00
Cash on Cash Return:
0.00%
Cap Rate:
0.00%
Understanding Rental Property Cash Flow
Investing in real estate is one of the most reliable ways to build wealth, but the success of an investment typically hinges on one critical metric: Cash Flow. This calculator helps investors determine the profitability of a potential rental property by subtracting all operating expenses and debt service from the gross rental income.
How is Cash Flow Calculated?
The formula for rental property cash flow is straightforward in theory but requires precision in practice:
- Gross Income: The total rent collected plus any other income (laundry, parking, etc.).
- Operating Expenses: Costs required to run the property, including taxes, insurance, maintenance, property management fees, and vacancy reserves.
- Net Operating Income (NOI): Gross Income minus Operating Expenses.
- Debt Service: Your monthly mortgage payment (Principal and Interest).
- Cash Flow: NOI minus Debt Service.
Why Use a Cash on Cash Return Metric?
While monthly cash flow tells you how much money goes into your pocket every month, the Cash on Cash (CoC) Return tells you how hard your money is working. It is calculated by dividing your annual pre-tax cash flow by the total cash invested (Down Payment + Closing Costs + Rehab Costs).
For example, if you invest $50,000 to buy a property and it generates $5,000 in positive cash flow per year, your Cash on Cash return is 10%. This allows you to compare real estate returns against other investment vehicles like stocks or bonds.
Common Rules of Thumb
The 50% Rule: A quick estimation technique suggesting that 50% of your gross rental income will go toward operating expenses (excluding the mortgage). If a property rents for $2,000, expect $1,000 in expenses.
The 1% Rule: This rule suggests that for a property to be cash flow positive, the monthly rent should be at least 1% of the purchase price. For a $200,000 home, you should aim for $2,000/month in rent.