Analyze your potential real estate investment deals.
Purchase Information
Financing Details
Rental Income
Recurring Expenses
Investment Analysis
Monthly Cash Flow
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Cash on Cash Return
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Net Operating Income (NOI)
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Cap Rate
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Total Initial Investment:$0.00
Monthly Mortgage Payment (P&I):$0.00
Total Monthly Expenses (inc. Mortgage):$0.00
How to Analyze a Rental Property Investment
Investing in real estate is a powerful way to build wealth, but it relies heavily on the numbers. Using a Rental Property Cash Flow Calculator is essential for investors to determine if a specific property will generate a profit or become a financial burden. This tool helps you break down income, expenses, and financing costs to reveal the true potential of an investment.
Understanding the Key Metrics
When analyzing a rental property, there are four primary metrics that seasoned investors look at:
Cash Flow: This is the profit you take home each month after all expenses (including the mortgage) are paid. Positive cash flow is the lifeline of a rental investment.
Cash on Cash Return (CoC): This percentage measures the annual return on the actual cash you invested (down payment + closing costs). It allows you to compare real estate returns against other investment vehicles like stocks.
Net Operating Income (NOI): This represents the profitability of the property before financing costs and taxes. It is calculated by subtracting operating expenses from gross income.
Cap Rate (Capitalization Rate): Calculated as NOI divided by the property's purchase price. This metric helps compare the profitability of different properties regardless of how they are financed.
How to Calculate Rental Property Cash Flow
The formula for cash flow is deceptively simple, but requires accuracy in estimating expenses:
A common "rule of thumb" for screening properties is the 1% Rule. It states that the monthly rent should be at least 1% of the purchase price. For example, a $200,000 home should rent for at least $2,000 per month. While this doesn't guarantee positive cash flow, it is a quick way to filter out properties that are unlikely to be profitable.
Frequently Asked Questions
What is a good Cash on Cash return for rental property?
While targets vary by investor and market, a Cash on Cash return of 8% to 12% is generally considered strong for long-term residential rentals. In highly appreciative markets, investors might accept lower returns (4-6%), while in stable cash-flow markets, they may seek 15% or higher.
Should I include vacancy and maintenance if the house is new?
Yes. Even new homes require maintenance eventually, and tenants will eventually move out. Failing to account for vacancy (typically 5-8%) and maintenance (5-10%) will result in an inaccurate cash flow projection and potential financial surprises later.
How does the interest rate affect my cash flow?
The interest rate significantly impacts your mortgage payment, which is usually the largest expense. A higher rate increases your monthly debt service, directly reducing your monthly cash flow. Use the calculator above to see how a 1% shift in interest rates affects your bottom line.
function calculateRental() {
// 1. Get Input Values
var price = parseFloat(document.getElementById('purchasePrice').value) || 0;
var downPercent = parseFloat(document.getElementById('downPaymentPercent').value) || 0;
var closingCosts = parseFloat(document.getElementById('closingCosts').value) || 0;
var interestRate = parseFloat(document.getElementById('interestRate').value) || 0;
var termYears = parseFloat(document.getElementById('loanTerm').value) || 0;
var rent = parseFloat(document.getElementById('monthlyRent').value) || 0;
var vacancyRate = parseFloat(document.getElementById('vacancyRate').value) || 0;
var taxYearly = parseFloat(document.getElementById('propertyTax').value) || 0;
var insuranceYearly = parseFloat(document.getElementById('insurance').value) || 0;
var hoaMonthly = parseFloat(document.getElementById('hoaFees').value) || 0;
var maintRate = parseFloat(document.getElementById('maintenanceRate').value) || 0;
// 2. Perform Calculations
// Loan Calculations
var downPayment = price * (downPercent / 100);
var loanAmount = price – downPayment;
var totalInvested = downPayment + closingCosts;
// Mortgage Payment (P&I)
var monthlyRate = (interestRate / 100) / 12;
var totalPayments = termYears * 12;
var mortgagePayment = 0;
if (interestRate > 0) {
mortgagePayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)) / (Math.pow(1 + monthlyRate, totalPayments) – 1);
} else {
mortgagePayment = loanAmount / totalPayments;
}
// Operating Expenses
var vacancyCost = rent * (vacancyRate / 100);
var maintCost = rent * (maintRate / 100);
var monthlyTax = taxYearly / 12;
var monthlyIns = insuranceYearly / 12;
var totalMonthlyOpsExpenses = monthlyTax + monthlyIns + hoaMonthly + maintCost + vacancyCost;
var totalMonthlyExpenses = totalMonthlyOpsExpenses + mortgagePayment;
// Metrics
var monthlyCashFlow = rent – totalMonthlyExpenses;
var annualCashFlow = monthlyCashFlow * 12;
// NOI (Annual Rent – Annual Vacancy – Annual Ops Expenses (NOT mortgage))
var annualNOI = (rent * 12) – (vacancyCost * 12) – (totalMonthlyOpsExpenses * 12) + (vacancyCost * 12);
// Correction: NOI calculation standard is Gross Income – Operating Expenses.
// Vacancy is a loss of income, effectively an expense or reduction of gross.
// Let's do: Effective Gross Income = (Rent – Vacancy).
// NOI = Effective Gross Income – (Tax + Ins + HOA + Maint).
var effectiveGrossIncome = rent – vacancyCost;
var opsExpensesOnly = monthlyTax + monthlyIns + hoaMonthly + maintCost;
var monthlyNOI = effectiveGrossIncome – opsExpensesOnly;
var annualNOI_Final = monthlyNOI * 12;
// Cash on Cash Return
var coc = 0;
if (totalInvested > 0) {
coc = (annualCashFlow / totalInvested) * 100;
}
// Cap Rate (NOI / Purchase Price)
var capRate = 0;
if (price > 0) {
capRate = (annualNOI_Final / price) * 100;
}
// 3. Format Currency Function
var fmt = new Intl.NumberFormat('en-US', { style: 'currency', currency: 'USD' });
// 4. Output Results
document.getElementById('resCashFlow').innerText = fmt.format(monthlyCashFlow);
document.getElementById('resCashFlow').className = 'result-value ' + (monthlyCashFlow >= 0 ? 'positive' : 'negative');
document.getElementById('resCoc').innerText = coc.toFixed(2) + '%';
document.getElementById('resCoc').className = 'result-value ' + (coc >= 0 ? 'positive' : 'negative');
document.getElementById('resNoi').innerText = fmt.format(annualNOI_Final);
document.getElementById('resCapRate').innerText = capRate.toFixed(2) + '%';
document.getElementById('resTotalInvestment').innerText = fmt.format(totalInvested);
document.getElementById('resMortgage').innerText = fmt.format(mortgagePayment);
document.getElementById('resTotalExpenses').innerText = fmt.format(totalMonthlyExpenses);
document.getElementById('results').style.display = 'block';
}